-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H4YgBj9XwENZZDij5prR3X2kUzATUlRdrnooAyq+PbAxY1XfFrp+Q94EnzH6UMin HVFx8wgUnjzo+ujIO8MWJg== 0000950134-98-009828.txt : 19981222 0000950134-98-009828.hdr.sgml : 19981222 ACCESSION NUMBER: 0000950134-98-009828 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981221 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIMCO PROPERTIES LP CENTRAL INDEX KEY: 0000926660 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 841275621 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-24497 FILM NUMBER: 98773022 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET SUITE 1700 CITY: DENVER STATE: CO ZIP: 80222-8101 BUSINESS PHONE: 3037578101 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) December 21, 1998 -------------------- AIMCO Properties, L.P. --------------------------------------------------- (Exact name of registrant as specified in its charter) MARYLAND 0-24497 84-1275621 - -------------------------------- ------------- ------------------- (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 1873 SOUTH BELLAIRE STREET, SUITE 1700, DENVER, CO 80222-4348 - ----------------------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (303) 757-8101 ------------------- NOT APPLICABLE ------------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) 2 Item 5. OTHER EVENTS On November 3, 1998, AIMCO Properties, L.P., a Delaware limited partnership ("AIMCO Properties"), a subsidiary limited partnership of Apartment Investment and Management Company, a Maryland corporation ("AIMCO"), entered into an Acquisition and Contribution Agreement and Joint Escrow Instructions with Calhoun Beach Associates II Limited Partnership to acquire a multifamily residential property located in Minneapolis, Minnesota (the "Property"). Although no assurance can be given, this transaction is scheduled to close in December, 1998. The purchase price is $77.125 million, consisting of the assumption of $53.5 million in mortgage indebtedness, with the remaining $23.625 million to be paid $6.0 million in cash, and $17.625 million in limited partnership units ("OP Units") in AIMCO Properties, of which $8.625 million are common OP Units, and $9.0 million are preferred OP Units. The Property consists of two main buildings, one containing 76 units, and a second containing 275 units which was completed as of November, 1998. The Property also contains approximately 65,000 square feet of commercial space. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Businesses Acquired Historical Summary of Gross Income and Direct Operating Expenses of Calhoun Beach Club Apartments for the year ended December 31, 1997 and the nine months ended September 30, 1998 (unaudited), together with the Independent Auditors' Report (included as Exhibit 99.1 to this Report and incorporated herein by this reference). (b) Pro Forma Information The required pro forma financial information is included as Exhibit 99.2 to this Report and incorporated herein by this reference. 2 3 (c) Exhibits The following exhibits are filed with this report:
Exhibit Number Description - -------- ----------- 99.1 Historical Summary of Gross Income and Direct Operating Expenses of Calhoun Beach Club Apartments for the year ended December 31, 1997, and the nine months ended September 30, 1998 (unaudited), together with the Independent Auditors' Report. 99.2 Pro Forma Financial Information of Apartment Investment and Management Company.
3 4 SIGNATURE 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. AIMCO Properties, L.P. By: AIMCO-GP, Inc. its General Partner Date: December 21, 1998 By: /s/ Troy Butts --------------------------------- Troy Butts Senior Vice President, Chief Financial Officer 5 5 EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Sequentially Exhibit Number Description - ------- ----------- 99.1 Historical Summary of Gross Income and Direct Operating Expenses of Calhoun Beach Club Apartments for the year ended December 31, 1997, and the nine months ended September 30, 1998 (unaudited), together with the Independent Auditors' Report. 99.2 Pro Forma Financial Information of Apartment Investment and Management Company.
EX-99.1 2 HISTORICAL SUMMARY OF GROSS INCOME 1 EXHIBIT 99.1 Independent Auditors' Report Board of Directors Apartment Investment and Management Company We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses of Calhoun Beach Club Apartments as described in Note 1 for the year ended December 31, 1997. This Historical Summary is the responsibility of the management of Calhoun Beach Club Apartments. Our responsibility is to express an opinion on this Historical Summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion. The Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of Apartment Investment and Management Company, as described in Note 1 and is not intended to be a complete presentation of the income and expenses of Calhoun Beach Club Apartments. In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses of the Calhoun Beach Club Apartments, as described in Note 1, for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Denver, Colorado November 10, 1998 1 2 Calhoun Beach Club Apartments Historical Summary of Gross Income and Direct Operating Expenses
NINE MONTHS YEAR ENDED ENDED SEPTEMBER 30, DECEMBER 31, 1998 1997 ----------------- ---------------- (UNAUDITED) Gross Income Rental income $ 785,367 $ 967,038 Rental income - related party 688,628 865,540 Other income 34,148 33,575 ------------- ----------- Total gross income 1,508,143 1,866,153 Direct Operating Expenses Repairs and maintenance 282,433 245,281 Utilities 176,437 246,029 General and administrative 281,440 176,346 Real estate taxes 151,831 203,025 Management fees 58,209 71,361 ------------- ----------- Total direct operating expenses 950,350 942,042 ------------- ----------- Excess of gross income over direct operating expenses $ 557,793 $ 924,111 ============= ===========
See accompanying notes 2 3 Calhoun Beach Club Apartments Notes to Historical Summary of Gross Income and Direct Operating Expenses Year Ended December 31, 1997 and Nine Months Ended September 30, 1998 (unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION The Calhoun Beach Club Apartments (the "Property") is a mixed-use property located in Minneapolis, Minnesota which includes a 76-unit residential apartment community and 67,268 square feet of commercial space currently leased to seven tenants. As of November 10, 1998, the Property is under contract to be purchased by Apartment Investment and Management Company, a publicly traded real estate investment trust. The accompanying Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of Apartment Investment and Management Company. The Historical Summary is not intended to be a complete presentation of income and expenses of the Property for the year ended December 31, 1997, and the nine months ended September 30, 1998, as certain costs such as depreciation, amortization, interest, and other debt service costs have been excluded. These costs are not considered to be direct operating expenses. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of the Historical Summary in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts included in the Historical Summary and accompanying notes thereto. Actual results could differ from those estimates. REVENUE RECOGNITION Rental income attributable to residential leases is recorded when due from residents. Residential leases are for periods of up to one year, with rental payments due monthly. 4 Calhoun Beach Club Apartments Notes to Historical Summary of Gross Income and Direct Operating Expenses (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION (CONTINUED) Rental income from retail tenants is recognized on a straight-line basis over the term of the related lease. Property operating cost reimbursements due from retail tenants for utilities, real estate taxes and other recoverable costs are recognized in the period the expenses are incurred. The remaining term of retail tenant leases ranges from one to nine years, with rental payments due monthly. INTERIM UNAUDITED FINANCIAL INFORMATION The accompanying interim unaudited Historical Summary has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and was prepared on the same basis as the Historical Summary for the year ended December 31, 1997. In the opinion of management of the Property, all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for this interim period have been made. The excess of combined gross income over direct operating expenses for such interim period is not necessarily indicative of the excess of gross income over direct operating expenses for the full year. 3. TRANSACTIONS WITH AFFILIATES RENTAL INCOME The Property leases approximately 59,797 square feet of commercial space and one apartment unit to various affiliates of the owner of the Property. The remaining terms of the leases range from one to nine years. Total related party income recorded by the Property during 1997 is $865,540. MANAGEMENT FEES Twin Town Realty, Inc., an affiliate of the owner of the Property, receives management fees relating to the Property. The management fee is 4% of gross annual revenue, as defined in the management agreement. 4. FUTURE MINIMUM RENTAL INCOME The Property is leased to commercial tenants under operating leases with expiration dates ranging from one to nine years. Future minimum rentals on non-cancelable tenant leases at December 31, 1997 are as follows:
Year Amount ---- ------ 1998 $ 972,283 1999 948,372 2000 825,050 2001 809,400 2002 809,400 Thereafter 1,081,830 ---------- Total $5,446,335 ==========
EX-99.2 3 PRO FORMA FINANCIAL INFORMATION 1 EXHIBIT 99.2 PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P. AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998 INTRODUCTION On October 1, 1998, Apartment Investment and Management Company ("AIMCO") completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger"). In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred Stock") whose issue date market value approximately equaled $292 million. In addition to receiving the same dividends as holders of AIMCO Common Stock, holders of Class E Preferred Stock will be entitled to a special dividend of approximately $50 million in the aggregate. When that special dividend is paid in full, the Class E Preferred Stock will automatically convert into AIMCO Common Stock on a one-for-one basis, subject to antidilution adjustments, if any. In addition, AIMCO assumed approximately $411 million in indebtedness and other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed approximately $149.5 million of convertible securities and purchased approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia Properties Trust ("IPT") have entered into an agreement and plan of merger dated as of October 1, 1998, pursuant to which IPT is to be merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, IPT's common stock will be converted, at AIMCO's option, into 4,826,745 shares of AIMCO Class A Common Stock whose market value approximately equaled $152 million or $152 million in cash. AIMCO assumed approximately $68 million in indebtedness. In connection with the IFG Merger and the IPT Merger, AIMCO will incur approximately $55 million in transaction costs for a combined transactional value of approximately $1,183 million. AIMCO will contribute substantially all the assets and liabilities of Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together with its subsidiaries and other controlled entities, the "Partnership") (and together with entities in which that Partnership has a controlling financial interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The Class E Preferred Units have terms substantially the same as the Class E Preferred Stock. In addition, AIMCO will contribute substantially all the assets and liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for 4,457,765 limited partnership units in the Partnership ("OP Units"). In connection with the IFG Merger, the Partnership assumed property management of approximately 192,000 multifamily units which consist of general and limited partnership investments in 115,000 units and third party management of 77,000 units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a subsidiary of IFG, owns a 32% weighted average general and limited partnership interest in approximately 51,000 units. Immediately following the IFG Merger, in order to satisfy certain requirements of the Internal Revenue Code of 1986 (the "Code") applicable to AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG Reorganization") of the assets and operations of IFG whereby IFG's operations are being conducted through corporations (the "Unconsolidated Subsidiaries") in which the Partnership holds non-voting preferred stock that represents a 95% economic interest, and certain officers and/or directors of AIMCO hold, directly or indirectly, all of the voting common stock, representing a 5% economic interest. As a result of the controlling ownership interest in the Unconsolidated Subsidiaries held by others, the Partnership accounts for its interest in the Unconsolidated Subsidiaries on the equity method. In May and September of 1997, AIMCO directly or indirectly through a subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired the remaining shares of NHP Common Stock in a merger transaction accounted for as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued 6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5 million in cash. The total cost of the purchase of NHP was $349.5 million. Substantially all assets and liabilities of NHP were contributed by AIMCO to the Partnership. In June 1997, the Company purchased a group of companies (the "NHP Real Estate Companies") affiliated with NHP that hold general and limited partnership interests in partnerships (the "NHP Partnerships") that own 534 conventional and affordable multifamily apartment properties (the "NHP Properties") containing 87,659 units, a captive insurance subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The Company paid aggregate consideration of $54.8 million in cash and warrants that entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an exercise price of $36.00 per share. The Company engaged in a reorganization (the "NHP Real Estate Reorganization") of its interests in the NHP Real Estate Companies, which resulted in certain of the assets of the NHP Real Estate Companies being owned by a limited partnership (the "Unconsolidated Partnership") in which the Partnership holds 99% limited partner interest and certain directors and officers of AIMCO directly or indirectly, hold a 1% general partner interest. Immediately following the NHP Merger, in order to satisfy certain requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "NHP Reorganization") of the assets and operations of NHP that resulted in the Master Property Management Agreement being terminated and NHP's operations being conducted through Unconsolidated Subsidiaries in which the AIMCO Operating Partnership holds non-voting preferred stock that represents a 95% economic interest, and 1 2 certain officers and/or directors of AIMCO hold, directly or indirectly, all of the voting common stock, representing a 5% economic interest. As a result of the controlling ownership interest in the Unconsolidated Subsidiaries held by others, the Partnership accounts for its interest in the Unconsolidated Subsidiaries on the equity method. On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc. ("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the "Ambassador Merger"). Each outstanding share of stock ("Ambassador Common Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any outstanding options to purchase Ambassador Common Stock were converted, at the election of the option holder, into cash or options to purchase AIMCO Common Stock at such options' then current exercise price divided by the Conversion Ratio. In accordance with the Agreement and Plan of Merger, dated December 23, 1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador Merger Agreement"), the outstanding shares of Class A Senior Cumulative Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock") were redeemed and converted into Ambassador Common Stock prior to the Ambassador Merger. Following the consummation of the Ambassador Merger, a subsidiary of the Partnership was merged with and into the Ambassador Operating Partnership (the "Ambassador OP Merger"). Each outstanding unit of limited partnership interest in the Ambassador Operating Partnership was converted into the right to receive 0.553 OP Units, and as a result, the Ambassador Operating Partnership became a 99.9% owned subsidiary partnership of the Partnership. Also during 1997, the Partnership (i) (a) acquired 44 properties for aggregate purchase consideration of $467.4 million, of which $56 million was paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and issued OP Units valued at $7.3 million in connection with the acquisition of partnership interests through tender offers in certain partnerships ((a) and (b) together are the "1997 Property Acquisitions") and (c) paid $19.9 million to acquire 886,600 shares of Ambassador Common Stock (together with the 1997 Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately 16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4 million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C 9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000 OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units (collectively, the "1997 Stock Offerings"); and (iii) sold five real estate properties (the "1997 Dispositions"). Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and (d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock in a private placement for $100.0 million (the "Class J Preferred Stock Offering"); of which all proceeds were contributed by AIMCO to the Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively, the "1998 Stock Offerings"); (ii) purchased 28 properties for aggregate purchase consideration of $235 million, of which $34.5 million was paid in the form of OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the "1998 Dispositions"); and (iv) contracted to purchase three properties for aggregate purchase consideration of $139.8 million, of which $44.1 million will be paid in the form of OP units (the "Probable Purchases"). 2 3 PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP The following Pro Forma Consolidated Balance Sheet of the Partnership as of September 30, 1998 has been prepared as if each of the following transactions had occurred as of September 30, 1998: (i) the purchase of nine properties for an aggregate purchase price of $62.5 million; (ii) the Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG Merger; (v) the IPT Merger; and (vi) the IFG Reorganization. The following Pro Forma Consolidated Statement of Operations of the Partnership for the year ended December 31, 1997 has been prepared as if each of the following transactions had occurred as of January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions; (iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization; (vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi) the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador Merger; (xv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; and (xvii) the IFG Reorganization. The following Pro Forma Consolidated Statement of Operations of the Partnership for the nine months ended September 30, 1998 has been prepared as if each of the following transactions had occurred as of January 1, 1997: (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG Merger; (vii) the AMIT Merger; (viii) the IPT Merger; and (ix) the IFG Reorganization. The following Pro Forma Financial Information is based, in part, on the following historical financial statements, which are included herein or have been previously filed by AIMCO or the Partnership: (i) the audited Consolidated Financial Statements of the Partnership for the year ended December 31, 1997; (ii) the unaudited Consolidated Financial Statements of the Partnership for the nine months ended September 30, 1998; (iii) the audited Consolidated Financial Statements of Ambassador for the year ended December 31, 1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the four months ended April 30, 1998; (v) the audited Consolidated Financial Statements of IFG for the year ended December 31, 1997; (vi) the audited Consolidated Financial Statements of AMIT for the year ended December 31, 1997; (vii) the unaudited Consolidated Financial Statements of IFG for the nine months ended September 30, 1998; (viii) the unaudited Consolidated Financial Statements of AMIT for the eight months ended August 31, 1998; (ix) the unaudited Consolidated Financial Statements of NHP for the nine months ended September 30, 1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate Companies for the three months ended March 31, 1997; (xi) the unaudited Financial Statements of NHP Southwest Partners, L.P. for the three months ended March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New LP Entities for the three months ended March 31, 1997; (xiii) the unaudited Combined Financial Statements of the NHP Borrower Entities for the three months ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income and Certain Expenses of The Bay Club at Aventura for the three months ended March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct Operating Expenses of Morton Towers for the six months ended June 30, 1997; (xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the Thirty-Five Acquisition Properties for the six months ended June 30, 1997; (xvii) the unaudited Statement of Revenues and Certain Expenses of First 3 4 Alexandria Associates, a Limited Partnership for the nine months ended September 30, 1997; (xviii) the unaudited Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a Limited Partnership for the nine months ended September 30, 1997; (xix) the unaudited Statement of Revenues and Certain Expenses of Point West Limited Partnership, A Limited Partnership for the nine months ended September 30, 1997; (xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park Partnership for the nine months ended September 30, 1997; (xxi) the audited Combined Historical Summary of Gross Income and Direct Operating Expenses of the Realty Investment Apartment Communities I for the year ended December 31, 1997, (xxii) the audited Combined Historical Summary or Gross Income and Direct Operating Expenses of the Cirque Apartment Communities for the year ended December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross Income and Direct Operating Expenses of the Realty Investment Apartment Communities II for the year ended December 31, 1997; (xxiv) the audited Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited Combined Historical Summary of Gross Income and Direct Operating Expenses of the Realty Investment Apartment Communities I for the nine months ended September 30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and Direct Operating Expenses of the Cirque Apartment Communities for the three months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary of Gross Income and Direct Operating Expenses of the Realty Investment Apartment Communities II for the nine months ended September 30, 1998; and (xxviii) the unaudited Historical Summary of Gross Income and Direct Operating Expenses of Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The following Pro Forma Financial Information should be read in conjunction with such financial statements and the notes thereto incorporated by reference herein. The unaudited Pro Forma Financial Information has been prepared using the purchase method of accounting whereby the assets and liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the 1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are adjusted to estimated fair market value, based upon preliminary estimates, which are subject to change as additional information is obtained. The allocations of purchase costs are subject to final determination based upon estimates and other evaluations of fair market value. Therefore, the allocations reflected in the following unaudited Pro Forma Financial Information may differ from the amounts ultimately determined. The following unaudited Pro Forma Financial Information is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations of the Partnership that would have occurred if such transactions had been completed on the dates indicated, nor does it purport to be indicative of future financial positions or results of operations. In the opinion of the Partnership's management, all material adjustments necessary to reflect the effects of these transactions have been made. 4 5 AIMCO PROPERTIES, L.P. PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 IN THOUSANDS, EXCEPT SHARE DATA
COMPLETED TRANSACTIONS IFG AIMCO BEFORE AND PROBABLE IFG MERGER IFG HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ------------- --------------- ------------- -------------- ----------------- Real estate......................... $2,355,122 $ 202,332 $ 44,488 $ 15,363 (G) $2,617,305 Property held for sale.............. 42,212 -- -- -- 42,212 Investments in securities........... -- -- -- 443,513 (G) (443,513)(H) -- Investments in and notes receivable from unconsolidated subsidiaries...................... 127,082 -- -- -- 127,082 Investments in and notes receivable from unconsolidated real estate partnerships...................... 246,847 -- 232,892 394,321 (G) 874,060 Mortgage notes receivable........... -- -- 20,916 -- 20,916 Cash and cash equivalents........... 43,681 -- 73,064 -- 116,745 Restricted cash..................... 83,187 -- 2,691 -- 85,878 Accounts receivable................. 11,545 -- 54,060 (43,082)(G) 22,523 Deferred financing costs............ 21,835 -- 7,020 (7,020)(G) 21,835 Goodwill............................ 120,503 -- 19,503 243,766 (G) 383,772 Property management contracts....... -- -- 86,419 21,916 (G) 108,335 Other assets........................ 69,935 -- 20,128 (3,572)(G) 86,491 ---------- --------- -------- --------- ---------- Total Assets................ $3,121,949 $ 202,332 $561,181 $ 621,692 $4,507,154 ========== ========= ======== ========= ========== Secured notes payable............... $ 774,676 $ 122,568 $ 29,002 $ -- $ 926,246 Secured tax-exempt bond financing... 399,925 -- 399,925 Secured short-term financing........ 50,000 (43,527) 332,691 -- 339,164 Unsecured short-term financing...... 50,800 (28,380) -- -- 22,420 Accounts payable, accrued and other liabilities....................... 131,799 -- 33,241 50,000 (G) 55,279 (G) 4,935 (G) 38,791 (G) 314,045 Deferred tax liability.............. -- -- 18,802 17,850 (G) 36,652 Security deposits and prepaid rents............................. 13,171 -- 3,533 (3,533) 13,171 ---------- --------- -------- --------- ---------- 1,420,371 50,661 417,269 163,322 2,051,623 Minority interest................... 42,086 6,495 108,485 (108,485)(G) 48,581 Company-obligated mandatorily redeemable convertible securities of a subsidiary trust............. -- -- 144,282 5,218 149,500 Redeemable Partnership Units........ 232,405 45,176 -- -- 277,581 Partners' capital and shareholders' equity Common stock...................... -- -- 320 (320)(G) -- Additional paid-in capital........ -- -- (86,959) 86,959 (G) -- Distributions in excess of earnings......................... -- -- (22,216) 22,216 (G) -- General and Special Limited Partner.......................... 1,039,525 -- -- 443,513 (H) -- 9,269 (G) 1,492,307 Preferred Units................... 387,562 100,000 -- -- 487,562 ---------- --------- -------- --------- ---------- 1,427,087 100,000 (108,855) 561,637 1,979,869 ---------- --------- -------- --------- ---------- Total Liabilities and Equity.................... $3,121,949 $ 202,332 $561,181 $ 621,692 $4,507,154 ========== ========= ======== ========= ========== IFG REORGANIZATION PRO ADJUSTMENTS(F) FORMA -------------- ---------- Real estate......................... $ -- $2,617,305 Property held for sale.............. -- 42,212 Investments in securities........... -- -- Investments in and notes receivable from unconsolidated subsidiaries...................... 73,697(I) 200,779(K) Investments in and notes receivable from unconsolidated real estate partnerships...................... -- 874,060 Mortgage notes receivable........... 20,916 Cash and cash equivalents........... (17,897)(J) 98,848 Restricted cash..................... (1,352)(J) 84,526 Accounts receivable................. (6,631)(J) 15,892 Deferred financing costs............ -- 21,835 Goodwill............................ -- 383,772 Property management contracts....... (73,696)(I) 34,639 Other assets........................ (14,167)(J) 72,324 --------- ---------- Total Assets................ $ (40,046) $4,467,108 ========= ========== Secured notes payable............... $ -- $ 926,246 Secured tax-exempt bond financing... -- 399,925 Secured short-term financing........ 339,164 Unsecured short-term financing...... -- 22,420 Accounts payable, accrued and other liabilities....................... (3,394)(J) 310,651 Deferred tax liability.............. (36,652)(I) -- Security deposits and prepaid rents............................. -- 13,171 --------- ---------- (40,046) 2,011,577 Minority interest................... -- 48,581 Company-obligated mandatorily redeemable convertible securities of a subsidiary trust............. -- 149,500 Redeemable Partnership Units........ -- 277,581 Partners' capital and shareholders' equity Common stock...................... -- -- Additional paid-in capital........ -- -- Distributions in excess of earnings......................... -- -- General and Special Limited Partner.......................... -- 1,492,307 Preferred Units................... -- 487,562 ---------- --------- -- 1,979,869 ---------- --------- Total Liabilities and Equity.................... $ (40,046) $4,467,108 ========= ==========
5 6 - ------------------------- (A) Represents the unaudited historical consolidated financial position of the Partnership as of September 30, 1998. (B) Represents adjustments to reflect the purchase of nine properties for an aggregate purchase price of $62.5 million; the Class J Preferred Stock Offering and the Probable Purchases. (C) Represents the unaudited historical consolidated financial position of IFG as of September 30, 1998. 6 7 (D) Represents the following adjustments occurring as a result of the IFG Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based on consideration to holders of IFG common stock outstanding as of the date of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A Common Stock to holders of IPT common stock (other than AIMCO); (iii) the payment of a special dividend of $50,000; (iv) the assumption of $149,500 of the convertible debentures of IFG; (v) the allocation of the combined purchase price of IFG and IPT based on the preliminary estimates of relative fair market value of the assets and liabilities of IFG and IPT; and (vi) the contribution by AIMCO of substantially all the assets and liabilities of Insignia and IPT to the Partnership in exchange for OP Units. (E) Represents the effects of AIMCO's acquisition of IFG immediately after the IFG Merger. These amounts do not give effect to the IFG Reorganization, which includes the transfers of certain assets and liabilities of IFG to the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred immediately after the IFG Merger so that AIMCO could maintain its qualification as a REIT. This column is included as an intermediate step to assist the reader in understanding the entire nature of the IFG Merger and related transactions. (F) Represents adjustments related to the IFG Reorganization, whereby, following the IFG Merger, the Partnership contributed or sold to the combined Unconsolidated Subsidiaries certain assets and liabilities of IFG, primarily management contracts and related working capital assets and liabilities related to IFG's third party property management operations. The adjustments reflect the transfer of assets valued at the Partnership's new basis resulting from the allocation of the purchase price of IFG. The Partnership received non-voting preferred stock as consideration in exchange for the net assets contributed. The net deferred tax liability is assumed by the Unconsolidated Subsidiaries as it resulted from the assets and liabilities transferred to the Unconsolidated Subsidiaries. (G) In connection with the IFG Merger and the IPT Merger, AIMCO became obligated to issue a total of 13,250,496 shares of AIMCO Common Stock The total purchase price of IFG and IPT is $1,182,873, as follows: Issuance of 8,423,751 shares of AIMCO Common Stock in the IFG Merger, at $34.658 per share.......................... $ 291,949 Issuance of 4,826,745 shares of AIMCO Common Stock in the IPT Merger, at $31.50 per share........................... 151,564 Assumption of Convertible Debentures........................ 149,500 Assumption of liabilities as indicated in the Merger Agreement.......................................... 452,527 Transaction costs........................................... 55,279 Generation of deferred tax liability........................ 17,850 Special dividend............................................ 50,000 Purchase of IFG Common Stock prior to merger................ 4,935 Consideration for options................................... 9,269 ---------- Total............................................. $1,182,873 ==========
The purchase price was allocated to the various assets of IFG acquired in the IFG Merger, as follows: Purchase price.............................................. $1,182,873 Historical basis of IFG's assets acquired ................... (561,181) ---------- Step-up to record the fair value of IFG's assets acquired... $ 621,692 ==========
7 8 This step-up was applied to IFG's assets as follows: Real estate................................................. $ 15,363 Investment in real estate partnerships...................... 394,321 Decrease in accounts receivable............................. (43,082) Decrease in deferred loan costs............................. (7,020) Management contracts........................................ 21,916 Increase in goodwill........................................ 243,766 Reduction in value of other assets.......................... (3,572) -------- Total............................................. $621,692 ========
The fair value of IFG's assets, primarily the real estate and management contracts, was calculated based on estimated future cash flows of the underlying assets. As of September 30, 1998, IFG's stockholder's equity was $34,950, which is detailed as follows: Common stock................................................ $ 320 Additional paid-in capital.................................. (86,959) Distributions in excess of earnings......................... (22,216) --------- Total............................................. $(108,855) =========
Upon completion of the IFG Merger, the entire amount of the stockholder's equity was eliminated. In addition, the minority interest in other partnerships of IFG of $66,241 will be eliminated upon the IPT Merger. (H) Represents the issuance of a total of 12,881,516 OP Units to AIMCO and the concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and IPT stockholders, in exchange for all the shares of IFG and IPT common stock. In accordance with the IFG Merger Agreement, AIMCO became obligated to issue 8,423,751 shares of Class E Preferred Stock, approximately equal to $292 million. Each share of Class E Preferred Stock will automatically convert to one share of AIMCO Common Stock upon the payment of the special dividend thereon. As such, for the purpose of preparing the pro forma financial statements, AIMCO's management believes that the Class E Preferred Stock is substantially the same as AIMCO Common Stock, and that the fair value of the Class E Preferred Stock approximates the fair value of the AIMCO Common Stock. Upon the payment of the special dividend on the Class E Preferred Stock and the conversion of the Class E Preferred Stock to AIMCO Common Stock, the former IFG stockholders will own approximately 15.0% of the AIMCO Common Stock and the IPT stockholders will own approximately 7.3% of AIMCO Common Stock. The special dividend on the Class E Preferred Stock is intended to represent a distribution in an amount at least equal to the earnings and profits of IFG at the time of the IFG Merger, to which AIMCO succeeds. Concurrent with the issuance of Class E Preferred Stock, the Partnership will issue comparable Class E Preferred Units to AIMCO. The Class E Preferred Units will have terms substantially the same as the Class E Preferred Stock. (I) Represents the increase in the Partnership's investment in Unconsolidated Subsidiaries to reflect the contribution or sale of property management contracts, including the related deferred tax liability, in exchange for preferred stock and a note payable from the Unconsolidated Subsidiaries. These assets and liabilities are valued at the Partnership's new basis resulting from the allocation of the purchase price of IFG. (J) Represents certain assets and liabilities of IFG, primarily related to the management operations of IFG, contributed or sold by the Partnership to the Unconsolidated Subsidiaries, 8 9 (K) Represents notes receivable from the Unconsolidated Subsidiaries of $95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity in the Unconsolidated Subsidiaries of $62,987. The combined pro forma balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998 is presented below, which reflects the effects of the IFG Merger, the IPT Merger, and the IFG Reorganization as if such transactions had occurred as of September 30, 1998. 9 10 UNCONSOLIDATED SUBSIDIARIES PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT SHARE DATA)
IFG HISTORICAL REORGANIZATION(i) PRO FORMA ---------- ----------------- ---------- ASSETS Real estate............................... $ 22,376 $ -- $ 22,376 Cash and cash equivalents................. 16,919 17,897(ii) 34,816 Restricted cash........................... 5,507 1,352(ii) 6,859 Management contracts...................... 47,846 73,696(iii) 121,542 Accounts receivable....................... 13,109 6,631(ii) 19,740 Deferred financing costs.................. 3,117 -- 3,117 Goodwill.................................. 43,544 -- 43,544 Other assets.............................. 51,498 14,167(ii) 65,665 -------- -------- -------- $203,916 $113,743 $317,659 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Secured notes payable..................... $114,302 $ 45,000(iii) $159,302 Accounts payable, accrued and other liabilities............................. 56,773 3,394(ii) 60,167 Security deposits and deferred income..... 334 --(ii) 334 Deferred tax liability.................... -- 36,652(iii) 36,652 -------- -------- -------- 171,409 85,046 256,455 Common stock.............................. 2,061 1,510(iv) 3,571 Preferred stock........................... 34,290 28,697(iii) 62,987 Retained earnings......................... (3,844) -- (3,844) Notes receivable on common stock purchases............................... -- (1,510)(iv) (1,510) -------- -------- -------- 32,507 28,697 61,204 -------- -------- -------- $203,916 $113,743 $317,659 ======== ======== ========
- ------------------------- (i) Represents adjustments related to the IFG Reorganization, whereby, following the IFG Merger, the Partnership contributed or sold to the combined Unconsolidated Subsidiaries certain assets and liabilities of IFG, primarily related to the management operations owned by IFG. The adjustments reflect the transfer of assets valued at the Partnership's new basis resulting from the allocation of the purchase price of IFG. the Partnership received non-voting preferred stock as consideration in exchange for the net assets contributed. The net deferred tax liability is assumed by the Unconsolidated Subsidiaries as it resulted from the assets and liabilities transferred to the Unconsolidated Subsidiaries. (ii) Represents certain assets and liabilities of IFG, primarily related to the management operations of IFG, contributed or sold by the Partnership to the Unconsolidated Subsidiaries, valued at the Partnership's new basis resulting from the allocation of the purchase price of IFG. (iii)Represents the transfer or sale of management contracts, the establishment of an intercompany note,and the establishment of the related estimated net deferred Federal and state tax liabilities at a combined rate of 40% for the estimated difference between the book and tax basis of the net assets of the Unconsolidated Subsidiaries. The primary component of the deferred tax liability is the difference between the new basis of the property management contracts, as a result of the allocation of the purchase price of IFG, and the historical tax basis. (iv) Represents the issuance of common stock to the common stockholders of the Unconsolidated Subsidiaries in exchange for notes receivable, in order for the common stockholders to maintain their respective ownership interest in the Unconsolidated Subsidiaries. 10 11 AIMCO PROPERTIES, L.P. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
COMPLETED AMBASSADOR TRANSACTIONS AND NHP AMBASSADOR PURCHASE PRICE HISTORICAL(A) PROBABLE PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ------------- ---------------------- --------------- ------------- -------------- Rental and other property revenues........................... $193,006 $118,471 (I) 12,878 (J) $ 6,660 $ 93,329 $ -- Property operating expenses......... (76,168) (58,595)(I) (5,731)(J) (2,941) (36,088) -- Owned property management expense... (6,620) (4,256)(I) (673)(J) (282) -- -- Depreciation........................ (37,741) (23,925)(I) (4,892)(J) (1,414) (18,979) (5,997)(O) -------- -------- ------- -------- ------- Income from property operations..... 72,477 33,277 2,023 38,262 (5,997) -------- -------- ------- -------- ------- Management fees and other income.... 13,937 -- 7,813 -- -- Management and other expenses....... (9,910) -- (5,394) -- -- Corporate overhead allocation....... (588) -- -- -- -- Amortization........................ (1,401) -- (5,800) -- -- -------- -------- ------- -------- ------- Income from service company business........................... 2,038 -- (3,381) -- -- Minority interest in service company business........................... (10) -- -- -- -- -------- -------- ------- -------- ------- AIMCO's share of income from service company business................... 2,028 -- (3,381) -- -- -------- -------- ------- -------- ------- General and administrative expenses........................... (5,396) -- (1,025) (7,392) 7,392(P) Interest expense.................... (51,385) (2,842)(K) (3,569)(L) (5,462) (26,987) (221)(Q) Interest income..................... 8,676 -- 1,900 -- -- Minority interest .................. 1,008 960(M) 16 (851) 705(R) Equity in losses of unconsolidated partnerships....................... (1,798) (122)(N) (8,542) 405 -- Equity in earnings of unconsolidated subsidiaries....................... 4,636 -- 5,790 -- -- -------- -------- ------- -------- ------- Income (loss) from operations....... 30,246 27,704 (8,681) 3,437 1,879 Income tax provision................ -- -- -- -- -- Gain on dispositions of property.... 2,720 (2,720) -- -- -- -------- -------- ------- -------- ------- Income (loss) before extraordinary item and minority interest in AIMCO Operating Partnership.............. 32,966 24,984 (8,681) 3,437 1,879 Extraordinary item -- early extinguishment of debt............. (269) 269 -- -- -- -------- -------- ------- -------- ------- Net income ......................... 32,697 25,253 (8,681) 3,437 1,879 Income attributable to preferred unitholders........................ 2,315 38,859 -- -- -- -------- -------- ------- -------- ------- Income attributable to common unitholders........................ $ 30,382 $(13,606) $(8,681) $ 3,437 $ 1,879 ======== ======== ======= ======== ======= Basic earnings per OP unit.......... $ 1.09 ======== Diluted earnings per OP unit........ $ 1.08 ======== Weighted average OP units outstanding........................ 27,732 ======== Weighted average OP units and equivalents outstanding............ 28,113 ======== IFG IFG IFG AS MERGER REORGANIZATION ADJUSTED(F) ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA ----------- -------------- -------------- ---------- Rental and other property revenues........................... $ 6,912 $ -- $ -- $ 431,256 Property operating expenses......... (3,307) -- -- (182,830) Owned property management expense... -- -- -- (11,831) Depreciation........................ (966) (1,937)(S) -- (95,851) -------- -------- -------- --------- Income from property operations..... 2,639 (1,937) -- 140,744 -------- -------- -------- --------- Management fees and other income.... 94,330 -- (74,404)(X) 41,676 Management and other expenses....... (57,615) -- 49,236(X) (23,683) Corporate overhead allocation....... -- -- -- (588) Amortization........................ (16,768) (36,563)(T) 28,355(Y) (32,177) -------- -------- -------- --------- Income from service company business........................... 19,947 (36,563) 3,187 (14,772) Minority interest in service company business........................... -- -- -- (10) -------- -------- -------- --------- AIMCO's share of income from service company business................... 19,947 (36,563) 3,187 (14,782) -------- -------- -------- --------- General and administrative expenses........................... (21,199) -- 6,392(X) (21,228) Interest expense.................... (9,035) -- -- (99,501) Interest income..................... 10,967 -- 191(Z) 21,734(BB) Minority interest .................. (12,871) 1,552 (U) -- (9,481) Equity in losses of unconsolidated partnerships....................... 12,515 (24,281)(V) -- (21,823) Equity in earnings of unconsolidated subsidiaries....................... -- -- (4,181)(AA) 6,245(DD) -------- -------- -------- --------- Income (loss) from operations....... 2,963 (61,229) 5,589 1,908 Income tax provision................ 1,701 (1,701)(W) -- -- Gain on dispositions of property.... 80 (80) -- -- -------- -------- -------- --------- Income (loss) before extraordinary item and minority interest in AIMCO Operating Partnership.............. 4,744 (63,010) 5,589 1,908 Extraordinary item -- early extinguishment of debt............. -- -- -- -- -------- -------- -------- --------- Net income ......................... 4,744 (63,010) 5,589 1,908 Income attributable to preferred unitholders........................ -- -- -- 41,174(CC) -------- -------- -------- --------- Income attributable to common unitholders........................ $ 4,744 $(63,010) $ 5,589 $ (39,266)(BB) ======== ======== ======== ========= Basic earnings per OP unit.......... $ (0.58)(BB) ========= Diluted earnings per OP unit........ $ (0.58)(BB) ========= Weighted average OP units outstanding........................ 67,522 ========= Weighted average OP units and equivalents outstanding............ 68,366 =========
11 12 - ------------------------- (A) Represents the Partnership's audited consolidated results of operations for the year ended December 31, 1997. (B) Represents adjustments to reflect the following as if they had occurred on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998 Acquisitions; (vi) the Probable Purchases; and (vii) the 1998 Dispositions. (C) Represents adjustments to reflect the purchase of the NHP Real Estate Companies, the NHP Merger, and the NHP Reorganization, as if the transactions had taken place on January 1, 1997. These adjustments are detailed, as follows:
NHP REAL ESTATE NHP NHP NHP NHP PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS ----------- -------------- ---------------- ------------------ ------------ Rental and other property revenues..... $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660 Property operating expenses.............. (2,941)(v) (8,411) -- 8,411 (xvii) (2,941) Owned property management expense.... (282)(v) (862) -- 862 (xvii) (282) Depreciation........... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii) (1,414) ------- -------- ------- -------- ------- Income from property operations............ 2,023 5,042 (693) (4,349) 2,023 ------- -------- ------- -------- ------- Management fees and other income.......... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813 Management and other expenses.............. (2,263)(viii) (35,267) -- 32,136 (xviii) (5,394) Amortization........... -- (9,111) (4,432)(xii) 7,743 (xix) (5,800) ------- -------- ------- -------- ------- Income from service company business...... (858) 27,798 (4,432) (25,889) (3,381) ------- -------- ------- -------- ------- General and administrative expenses.............. -- (16,266) 8,668 (xiii) 6,573 (xviii) (1,025) Interest expense....... (5,082)(ix) (10,685) -- 10,305(xx) (5,462) Interest income........ 540(v) 1,963 -- (603)(xxi) 1,900 Minority interest ..... 16(v) -- -- -- 16 Equity in losses of unconsolidated partnerships.......... (3,905)(x) -- (4,631)(xiv) (6) (8,542) Equity in earnings of unconsolidated subsidiaries.......... -- -- (4,636)(xv) 10,426 (xxii) 5,790 ------- -------- ------- -------- ------- Income (loss) from operations............ (7,266) 7,852 (5,724) (3,543) (8,681) Income tax provision... -- (3,502) 3,502 (xvi) -- -- ------- -------- ------- -------- ------- Net income (loss)...... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681) ======= ======== ======= ======== =======
12 13 - ------------------------- (i) Represents the adjustment to record activity from January 1, 1997 to the date of acquisition, as if the acquisition of the NHP Real Estate Companies had occurred on January 1, 1997. The historical financial statements of the NHP Real Estate Companies consolidate certain real estate partnerships in which they have an interest that will be presented on the equity method by the Partnership as a result of the NHP Real Estate Reorganization. In addition, represents adjustments to record additional depreciation and amortization related to the increased basis in the assets of the NHP Real Estate Companies as a result of the allocation of the purchase price of the NHP Real Estate Companies and additional interest expense incurred in connection with borrowings incurred by the Partnership to consummate the NHP Real Estate Acquisition. (ii) Represents the unaudited consolidated results of operations of NHP for the period from January 1, 1997 through December 8, 1997 (date of the NHP Merger). (iii) Represents the following adjustments occurring as a result of the NHP Merger: (i) the reduction in personnel costs, primarily severance costs, pursuant to a restructuring plan; (ii) the incremental depreciation of the purchase price adjustment related to real estate; (iii) the incremental amortization of the purchase price adjustment related to the management contracts, furniture, fixtures and equipment, and goodwill; (iv) the reversal of equity in earnings of NHP during the pre-merger period when the Partnership held a 47.62% interest in NHP; and (v) the amortization of the increased basis in investments in real estate partnerships based on the purchase price adjustment related to real estate and an estimated average life of 20 years. (iv) Represents adjustments related to the NHP Reorganization, whereby the Partnership contributed or sold to the Unconsolidated Subsidiaries and the Unconsolidated Partnership: (i) certain assets and liabilities of NHP, primarily related to the management operations and other businesses owned by NHP and (ii) 12 real estate properties containing 2,905 apartment units. The adjustments represent (i) the related revenues and expenses primarily related to the management operations and other businesses owned by NHP and (ii) the historical results of operations of such real estate partnerships contributed, with additional depreciation and amortization recorded related to the Partnership's new basis resulting from the allocation of the combined purchase price of NHP and the NHP Real Estate Companies. (v) Represents adjustments to reflect the acquisition of the NHP Real Estate Companies and the corresponding historical results of operations as if they had occurred on January 1, 1997. (vi) Represents incremental depreciation related to the consolidated real estate assets purchased from the NHP Real Estate Companies. Buildings and improvements are depreciated on the straight-line method over a period of 30 years, and furniture and fixtures are depreciated on the straight-line method over a period of 5 years. 13 14 (vii) Represents the adjustment to record the revenues from ancillary businesses purchased from the NHP Real Estate Companies as if the acquisition had occurred on January 1, 1997. (viii) Represents $4,878 related to the adjustment to record the expenses from ancillary businesses purchased from the NHP Real Estate Companies as if the acquisition had occurred on January 1, 1997, less $2,615 related to a reduction in personnel costs pursuant to a restructuring plan, approved by the Company's senior management, assuming that the acquisition of the NHP Real Estate Companies had occurred on January 1, 1997 and that the restructuring plan was completed on January 1, 1997. The restructuring plan specifically identifies all significant actions to be taken to complete the restructuring plan, including the reduction of personnel, job functions, location and the date of completion. (ix) Represents adjustments in the amount of $3,391 to reflect the acquisition of the NHP Real Estate Companies and the corresponding historical results of operations as if they had occurred on January 1, 1997, as well as the increase in interest expense in the amount of $1,691 related to borrowings on the Partnership's credit facilities of $55,807 to finance the NHP Real Estate Acquisition. (x) Represents adjustments in the amount of $2,432 to reflect the acquisition of the NHP Real Estate Companies and the corresponding historical results of operations as if they had occurred on January 1, 1997, as well as amortization of $1,473 related to the increased basis in investment in real estate partnerships, as a result of the allocation of the purchase price of the NHP Real Estate Companies, based on an estimated average life of 20 years. (xi) Represents incremental depreciation related to the real estate assets purchased from NHP. Buildings and improvements are depreciated on the straight-line method over a period of 20 years, and furniture and fixtures are depreciated on the straight-line method over a period of 5 years. (xii) Represents incremental depreciation and amortization of the tangible and intangible assets related to the property management and other business operated by the Unconsolidated Subsidiaries, based on the Partnership's new basis as adjusted by the allocation of the combined purchase price of NHP including amortization of management contracts of $3,782, depreciation of furniture, fixtures and equipment of $2,018 and amortization of goodwill of $7,743, less NHP's historical depreciation and amortization of $9,111. Management contracts are amortized using the straight-line method over the weighted average life of the contracts estimated to be approximately 15 years. Furniture, fixtures and equipment are depreciated using the straight-line method over the estimated life of 3 years. Goodwill is amortized using the straight-line method over 20 years. (xiii) Represents a reduction in personnel costs, primarily severance costs, pursuant to a restructuring plan, approved by the Company's senior management, specifically identifying all significant actions to be taken to complete the restructuring plan, assuming that the NHP Merger had occurred on 14 15 January 1, 1997 and that the restructuring plan was completed on January 1, 1997. (xiv) Represents adjustment for amortization of the increased basis in investments in real estate partnerships, as a result of the allocation of the combined purchase price of NHP and the NHP Real Estate Companies, based on an estimated average life of 20 years. (xv) Represents the reversal of equity in earnings in NHP during the pre-merger period when the Partnership held a 47.62% interest in NHP, as a result of the Partnership's acquisition of 100% of the NHP Common Stock. (xvi) Represents the reversal of NHP's income tax provision due to the restructuring of the management business to the Unconsolidated Subsidiaries. (xvii) Represents the contribution of NHP's 12 real estate properties containing 2,905 apartment units to the Unconsolidated Partnership pursuant to the NHP Reorganization. (xviii) Represents the historical income and expenses associated with certain assets and liabilities of NHP that were contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations and other businesses owned by NHP. (xix) Represents the amortization and depreciation of certain management contracts and other assets of NHP, based on the Partnership's new basis resulting from the allocation of the purchase price of NHP, that will be contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations and other businesses owned by NHP. (xx) Represents interest expense of $6,020 related to the contribution of NHP's 12 real estate properties containing 2,905 apartment units to the Unconsolidated Partnership and interest expense of $4,285 related to the certain assets and liabilities that will be contributed or sold to the Unconsolidated Subsidiaries pursuant to the NHP Reorganization. (xxi) Represents the interest income of $5,000 earned on notes payable of $50,000 to the Partnership issued as consideration for certain assets and liabilities sold to the Unconsolidated Subsidiaries by the Partnership, net of the elimination of the Partnership's share of the related interest expense of $4,750 reflected in the equity in earnings of the Unconsolidated Subsidiaries operating results, offset by $853 in interest income primarily related to the management operations and other businesses owned by NHP contributed or sold to the Unconsolidated Subsidiaries pursuant to the NHP Reorganization. (xxii) Represents the Partnership's equity in earnings of the Unconsolidated Subsidiaries. (D) Represents the audited historical statement of operations of Ambassador for the year ended December 31, 1997. Certain reclassifications have been made to Ambassador's historical statement of operations to conform to the Partnership's Statement of Operations presentation. The Ambassador historical statement of operations excludes extraordinary loss of $1,384 and a loss on sale of an interest rate cap of $509. 15 16 (E) Represents the following adjustments occurring as a result of the Ambassador Merger: (i) the incremental depreciation of the purchase price adjustment related to real estate; (ii) the reduction in personnel costs, primarily severance costs, pursuant to a restructuring plan; (iii) the reduction of interest expense resulting from the net reduction of debt; and (iv) the elimination of the minority interest associated with Jupiter-I, L.P. (F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT Merger, and the spin-off of Holdings as if these transactions had occurred on January 1, 1997. These adjustments are detailed, as follows:
IFG AMIT HOLDINGS IFG HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED ------------- ---------- ------------- ----------- Rental and other property revenues.................... $ 6,646 $ 266 $ -- $ 6,912 Property operating expenses... (3,251) (56) -- (3,307) Depreciation.................. (966) -- -- (966) --------- ------- --------- -------- Income from property operations.................. 2,429 210 -- 2,639 --------- ------- --------- -------- Management fees and other income...................... 389,626 -- (295,296) 94,330 Management and other expenses.................... (315,653) -- 258,038 (57,615) Amortization.................. (31,709) (303) 15,244 (16,768) --------- ------- --------- -------- Income from service company business.................... 42,264 (303) (22,014) 19,947 --------- ------- --------- -------- General and administrative expenses.................... (20,435) (1,351) 587 (21,199) Interest expense.............. (9,353) -- 318 (9,035) Interest income............... 4,571 6,853 (457) 10,967 Minority interest ............ (12,448) (382) (41) (12,871) Equity in income (losses) of unconsolidated partnership................. 10,027 2,639 (151) 12,515 --------- ------- --------- -------- Income (loss) from operations.................. 17,055 7,666 (21,758) 2,963 Income tax provision.......... (6,822) (180) 8,703 1,701 Gain on sale of property...... -- 80 -- 80 --------- ------- --------- -------- Net income (loss)............. 10,233 7,566 (13,055) 4,744 ========= ======= ========= ========
- ------------------------- (i) Represents the audited consolidated results of operations of IFG for the year ended December 31, 1997, as reported in IFG's Annual Report on Form 10-K. Certain reclassifications have been made to IFG's historical statement of operations to conform to the Partnership's statement of operations presentation. (ii) Represents the historical statement of operations of AMIT, as well as pro forma adjustments related to the AMIT Merger. The AMIT Merger closed prior to the IFG Merger. 16 17 (iii) Represents the distribution of two shares of Holdings common stock for each three shares of IFG common stock to holders of IFG common stock. (G) Represents the following adjustments occurring as a result of the IFG Merger and the IPT Merger: (i) the incremental depreciation of the purchase price adjustment related to consolidated real estate and investments in real estate partnerships; (ii) the amortization of goodwill and property management contracts resulting from the IFG Merger; (iii) the increase in interest expense resulting from the net increase in debt; and (iv) the elimination of the income tax provision. (H) Represents adjustments related to the IFG Reorganization, whereby, following the IFG Merger, the Partnership contributed or sold to the Unconsolidated Subsidiaries certain assets and liabilities of IFG, primarily management contracts and related working capital assets and liabilities related to IFG's third party management operations. The adjustments reflect the related revenues and expenses primarily related to the management operations owned by IFG, with additional amortization recorded related to the Partnership's new basis resulting from the allocation of the purchase price of IFG. (I) Represents adjustments to reflect the 1997 Property Acquisitions and the 1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions as if they had occurred on January 1, 1997. These pro forma operating results are based on historical results of the properties, except for depreciation, which is based on the Partnership's investment in the properties. These adjustments are as follows:
1997 PROPERTY 1997 1998 1998 ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL ------------- ------------ ------------ ------------ -------- Rental and other property revenues............... $ 88,589 $(4,081) $ 37,266 $(3,303) $118,471 Property operating expense................ (44,109) 1,944 (17,784) 1,354 (58,595) Owned property management expense................ (3,233) 133 (1,278) 122 (4,256) Depreciation............. (16,839) 452 (8,226) 688 (23,925)
(J) Represents adjustments to reflect the Probable Purchases as if they had occurred on January 1, 1997. These pro forma operating results are based on historical results of the properties, except for depreciation, which is based on the Partnership's investment in the properties. 17 18 (K) Represents adjustments to interest expense for the following: Borrowings on the Partnership's credit facilities and other loans and mortgages assumed in connection with the 1997 Property Acquisitions..................................... $(29,490) Repayments on the Partnership's credit facilities and other indebtedness with proceeds from the 1997 Dispositions and the 1997 Stock Offerings.................................. 19,568 Repayments on the Partnership's credit facilities with proceeds from a dividend received from one of the Unconsolidated Subsidiaries............................... 1,889 Borrowings on the Partnership's credit facilities and other loans and mortgages assumed in connection with the 1998 Acquisitions..................................... (14,922) Repayments on the Partnership's credit facilities and other indebtedness with proceeds from the 1998 Dispositions and the 1998 Stock Offerings.................................. 20,113 -------- $ (2,842) ========
(L) Represents adjustments to interest expense related to the assumption of mortgage debt in connection with the Probable Purchases. (M) Represents income related to limited partners in consolidated partnerships acquired in connection with the 1997 Property Acquisitions and the 1998 Property Acquisitions. (N) Represents the reduction in the Partnership's earnings in unconsolidated partnerships as a result of the consolidation of additional partnerships resulting from additional ownership acquired through tender offers. (O) Represents incremental depreciation related to the real estate assets purchased in connection with the Ambassador Merger. Buildings and improvements are depreciated on the straight-line method over a period of 30 years, and furniture and fixtures are depreciated on the straight-line method over a period of 5 years. (P) Decrease results from identified historical costs of certain items which will be eliminated or reduced as a result of the Ambassador Merger, as follows: Duplication of public company expenses...................... $ 724 Reduction in salaries and benefits.......................... 4,197 Merger related costs........................................ 524 Other....................................................... 1,947 ------ $7,392 ======
The reduction in salaries and benefits is pursuant to a restructuring plan, approved by the Company's senior management, assuming that the Ambassador Merger had occurred on January 1, 1997 and that the restructuring plan was completed on January 1, 1997. The restructuring plan specifically identifies all significant actions to be taken to complete the restructuring plan, including the reduction of personnel, job functions, location and date of completion. (Q) Represents the decrease in interest expense of $3,612 related to the repayment of the Ambassador revolving lines of credit upon consummation of the Ambassador Merger, offset by an increase in interest expense of $3,833 related to borrowings under the Partnership's credit facilities. 18 19 (R) Represents elimination of minority interest in Jupiter-I, L.P. resulting from the redemption of limited partnership interests not owned by Ambassador in connection with the Ambassador Merger. (S) Represents incremental depreciation related to the consolidated real estate assets purchased in connection with the IFG Merger and IPT Merger, based on the Partnership's new basis resulting from the allocation of the purchase price of IFG and IPT. Buildings and improvements are depreciated on the straight-line method over a period of 20 years, and furniture and fixtures are depreciated on the straight-line method over a period of 5 years. (T) Represents incremental depreciation and amortization of the tangible and intangible assets related to the property management business of IFG, based on the Partnership's new basis resulting from the allocation of the purchase price of IFG, including amortization of property management contracts of $36,112, amortization of goodwill of $13,163, and depreciation of furniture, fixtures, and equipment of $3,753, less IFG's historical depreciation and amortization of $16,465. Property management contracts are amortized using the straight-line method over a period of three years. Furniture, fixtures, and equipment are depreciated using the straight-line method over a period of three years. Goodwill is amortized using the straight-line method over 20 years. (U) Represents elimination of minority interest of IPT resulting from the IPT merger. (V) Represents amortization related to the increased basis in investment in real estate partnerships, as a result of the allocation of the purchase price of IFG and IPT, based on an estimated average life of 20 years, and based on the Partnership's new basis resulting from the allocation of the purchase price of IFG and IPT. (W) Represents the reversal of IFG's income tax provision. (X) Represents the historical income and expenses associated with certain assets and liabilities of IFG that were contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations of IFG. (Y) Represents the depreciation and amortization of certain management contracts and furniture, fixtures, and equipment that were contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations of IFG, based on the Partnership's new basis resulting from the allocation of the purchase price of IFG. (Z) Represents interest income of $3,825 earned on notes payable of $45,000 to the Partnership issued as consideration for certain assets and liabilities sold to the Unconsolidated Subsidiaries by the Partnership, net of the elimination of the Partnership's share of the related interest expense of $3,634 reflected on the equity in earnings of the Unconsolidated Subsidiaries. (AA) Represents the Partnership's equity in earnings of the Unconsolidated Subsidiaries. 19 20 (BB) The following table presents the net impact to pro forma net loss applicable to holders of OP Units and net loss per OP Units assuming the interest rate per annum increases by 0.25%: Increase in interest expense................................ $ 938 ======== Net income ................................................. $ 970 ======== Net loss attributable to OP unitholders..................... $(40,204) ======== Basic loss per OP unit..................................... $ (0.60) ======== Diluted loss per OP unit.................................... $ (0.60) ========
(CC) Represents the net income attributable to holders of the Class B Preferred Units, the Class C Preferred Units, the Class D Preferred Units, the Class G Preferred Units, the Class H Preferred Units and the Class J Preferred Units as if these Preferred Units had been issued as of January 1, 1997. (DD) Represents the Partnership's equity in earnings in the Unconsolidated Subsidiaries of $(2,139), plus the elimination of intercompany interest expense of $8,384. The combined Pro Forma Statement of Operations of the Unconsolidated Subsidiaries for the year ended December 31, 1997 is presented below, which represents the effects of the Ambassador Merger, the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG Reorganization as if these transactions had occurred as of January 1, 1997. 20 21 UNCONSOLIDATED SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
REORGANIZATION IFG HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA ------------- --------------- ------------------- ---------- Rental and other property revenues............... $ 6,194 $ 6,371(iv) $ -- $ 12,565 Property operating expenses............... (3,355) (3,531)(iv) -- (6,886) Owned property management expense................ (147) (478)(iv) -- (625) Depreciation expense..... (1,038) (767)(iv) -- (1,805) -------- -------- -------- -------- Income from property operations............. 1,654 1,595 -- 3,249 -------- -------- -------- -------- Management fees and other income................. 23,776 41,992(v) 74,404(x) 140,172 Management and other expenses............... (11,733) (20,403)(v) (49,236)(x) (81,372) Amortization............. (3,726) (4,017)(v) (28,355)(xi) (36,098) -------- -------- -------- -------- Income from service company................ 8,317 17,572 (3,187) 22,702 General and administrative expense................ -- (6,573)(v) (6,392)(x) (12,965) Interest expense......... (6,058) (5,849)(vi) (3,825)(xii) (15,732) Interest income.......... 1,001 (148)(v) -- 853 Minority interest ....... (2,819) 2,198 (viii) -- (621) Equity in losses of unconsolidated partnerships........... (1,028) 1,028(iv) -- -- Equity in earnings of Unconsolidated Subsidiaries........... 2,943 (2,943)(vii) -- -- -------- -------- -------- -------- Income (loss) from operations............. 4,010 6,880 (13,404) (2,514) Income tax provision..... (1,902) (3,013)(ix) 5,177 (xiii) 262 -------- -------- -------- -------- Net income (loss)........ $ 2,108 $ 3,867 $ (8,227) $ (2,252) ======== ======== ======== ======== Income attributable to preferred unitholders........... $ 2,003 $ 3,673 $ (7,815) $ (2,139) ======== ======== ======== ======== Income (loss) attributable to common unitholders........... $ 105 $ 194 $ (412) $ (113) ======== ======== ======== ========
21 22 - ------------------------- (i) Represents the historical results of operations of the Unconsolidated Subsidiaries for the year ended December 31, 1997. (ii) Represents adjustments related to the NHP Reorganization, which includes the sale or contribution of 14 properties containing 2,725 apartment units from the unconsolidated partnerships to the Unconsolidated Subsidiaries, as well as the sale or contribution of 12 properties containing 2,905 apartment units from the Unconsolidated Subsidiaries to the Unconsolidated Partnership. (iii) Represents adjustments related to the IFG Reorganization, whereby, following the IFG Merger, the Partnership contributed or sold to the Unconsolidated Subsidiaries certain assets and liabilities of IFG, primarily related to the management operations owned by IFG. The adjustments reflect the related revenues and expenses primarily related to the management operations owned by IFG, with additional amortization recorded related to the Partnership's new basis resulting from the allocation of the purchase price of IFG. (iv) Represents adjustments for the historical results of operations of the 14 real estate properties contributed or sold to the Unconsolidated Subsidiaries, offset by the historical results of operations of the 12 real estate properties contributed or sold to the Unconsolidated Partnership, with additional depreciation recorded related to the Partnership's new basis resulting from the allocation of purchase price of NHP and the NHP Real Estate Companies. (v) Represents adjustments to reflect income and expenses associated with certain assets and liabilities of NHP contributed or sold to the Unconsolidated Subsidiaries. (vi) Represents adjustments of $6,058 to reverse the historical interest expense of the Unconsolidated Subsidiaries, which resulted from its original purchase of NHP Common Stock, offset by $2,622 related to the contribution or sale of the 14 real estate properties, $4,285 related to assets and liabilities transferred from the Partnership to the Unconsolidated Subsidiaries and $5,000 related to a note payable to the Partnership. (vii) Represents the reversal of the historical equity in earnings of NHP for the period in which NHP was not consolidated by the Unconsolidated Subsidiaries. (viii) Represents the minority interest in the operations of the 14 real estate properties. (ix) Represents the estimated Federal and state tax provisions, which are calculated on the pro forma operating results of the Unconsolidated Subsidiaries, excluding amortization of goodwill which is not deductible for tax purposes. (x) Represents the historical income and expenses associated with certain assets and liabilities of IFG that were contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations of IFG. (xi) Represents the depreciation and amortization of certain management contracts and furniture, fixtures, and equipment that were contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations of IFG, based on the Partnership's new basis resulting from the allocation of the purchase price of IFG. (xii) Represents adjustment for interest expense related to a note payable to the Partnership. (xiii) Represents the estimated Federal and state tax provisions, which are calculated on the pro forma operating results of the Unconsolidated Subsidiaries, excluding amortization of goodwill, which is not deductible for tax purposes. 22 23 AIMCO PROPERTIES, L.P. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
COMPLETED TRANSACTIONS AMBASSADOR IFG AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS MERGER HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F) ------------- --------------- ------------- -------------- -------------- -------------- Rental and other property revenues................ $265,700 $ 18,063(H) 9,938(I) $35,480 $ -- $ 8,126 $ -- Property operating expenses................ (101,600) (8,116)(H) (4,638)(I) (14,912) -- (2,585) -- Owned property management expense................. (7,746) (670)(H) (517)(I) -- -- -- -- Depreciation.............. (59,792) (3,852)(H) (3,659)(I) (7,270) (1,420)(M) (904) (1,273)(Q) -------- -------- -------- ------- -------- -------- Income from property operations.............. 96,562 6,549 13,298 (1,420) 4,637 (1,273) -------- -------- -------- ------- -------- -------- Management fees and other income.................. 13,968 -- -- -- 71,155 -- Management and other expenses................ (8,101) -- -- -- (41,477) -- Corporate overhead allocation.............. (196) -- -- -- -- -- Amortization.............. (3) -- -- -- (13,986) (25,861)(R) -------- -------- -------- ------- -------- -------- Income from service company business........ 5,668 -- -- -- 15,692 (25,861) -------- -------- -------- ------- -------- -------- General and administrative expenses................ (7,444) -- (5,278) 5,278(N) (61,386) 45,823(S) Interest expense.......... (56,756) 2,432 (J) (3,273)(K) (10,079) 145(O) (24,871) -- Interest income........... 18,244 (1) -- -- 22,501 -- Minority interest in other partnerships............ (1,052) 537(L) (252) 252(P) (14,159) 6,622 (T) Equity in losses of unconsolidated partnerships............ (5,078) -- (71) -- 13,492 (14,304)(U) Equity in earnings of unconsolidated subsidiaries............ 8,413 -- -- -- -- -- Amortization of goodwill................ (5,071) -- -- -- -- -- -------- -------- -------- ------- -------- -------- Income (loss) from operations.............. 53,486 6,245 (2,382) 4,255 (44,094) 11,007 Income tax provision...... -- -- -- -- 1,180 (1,180)(V) Gain on dispositions of property................ 2,783 (2,783) -- -- 6,576 (6,576) -------- -------- -------- ------- -------- -------- Net income................ 56,269 3,462 (2,382) 4,255 (36,338) 3,251 Income attributable to preferred unitholders... 16,320 14,594 -- -- -- -- -------- -------- -------- ------- -------- -------- Income (loss) attributable to common unitholders... $ 39,949 $(11,132) $ (2,382) $ 4,255 $(36,338) $ 3,251 ======== ======== ======== ======= ======== ======== Basic earnings (loss) per OP Unit................. $ 0.80 ======== Diluted earnings (loss) per OP Unit................. $ 0.79 ======== Weighted average OP Units outstanding............. 50,420 ======== Weighted average OP Unit and equivalents outstanding............. 50,544 ======== IFG REORGANIZATION ADJUSTMENTS(G) PRO FORMA -------------- --------- Rental and other property revenues................ $ -- $337,307 Property operating expenses................ -- (131,851) Owned property management expense................. -- (8,933) Depreciation.............. -- (78,170) -------- -------- Income from property operations.............. -- 118,353 -------- -------- Management fees and other income.................. (56,211)(W) 28,912 Management and other expenses................ 35,192(W) (14,386) Corporate overhead allocation.............. -- (196) Amortization.............. 21,266(X) (18,584) -------- -------- Income from service company business........ 247 (4,254) -------- -------- General and administrative expenses................ 13,800(W) (9,207) Interest expense.......... -- (92,402)(AA) Interest income........... 143(Y) 40,887 Minority interest in other partnerships............ -- (8,052) Equity in losses of unconsolidated partnerships............ -- (5,961) Equity in earnings of unconsolidated subsidiaries............ (6,875)(Z) 1,538(CC) Amortization of goodwill................ -- (5,071) -------- -------- Income (loss) from operations.............. 7,315 35,832 Income tax provision...... -- -- Gain on dispositions of property................ -- -- -------- -------- Net income ............... 7,315 35,832 Income attributable to preferred unitholders... -- 30,914(BB) -------- -------- Income (loss) attributable to common unitholders... $ 7,315 $ 4,918(AA) ======== ======== Basic earnings (loss) per OP Unit................. $ 0.07(AA) ======== Diluted earnings (loss) per OP Unit................. $ 0.07(AA) ======== Weighted average OP Units outstanding............. 68,554 ======== Weighted average OP Units and equivalents outstanding............. 69,218 ========
23 24 - ------------------------- (A) Represents the Partnership's unaudited consolidated results of operations for the nine months ended September 30, 1998. (B) Represents adjustments to reflect the following as if they had occurred on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable Purchases; and (iv) the 1998 Dispositions. (C) Represents the unaudited historical statement of operations of Ambassador for the four months ended April 30, 1998. Certain reclassifications have been made to Ambassador's historical Statement of Operations to conform to the Partnership's Statement of Operations presentation. (D) Represents the following adjustments occurring as a result of the Ambassador Merger: (i) the incremental depreciation of the purchase price adjustment related to real estate; (ii) the reduction in personnel costs, primarily severance costs, pursuant to a restructuring plan; (iii) the reduction of interest expense resulting from the net reduction of debt; and (iv) the elimination of the minority interest associated with Jupiter-I, L.P. (E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT Merger and the spin-off of the common stock of Holdings as if these transactions had occurred on January 1, 1998. These adjustments are detailed, as follows:
IFG AMIT HOLDINGS IFG HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED ------------- ---------- ------------- ----------- Rental and other property revenues....................... $ 7,566 $ 560 $ -- $ 8,126 Property operating expenses...... (2,585) -- -- (2,585) Depreciation..................... (904) -- -- (904) --------- ------ --------- -------- Income from property operations..................... 4,077 560 -- 4,637 --------- ------ --------- -------- Management fees and other income......................... 311,475 -- (240,320) 71,155 Management and other expenses.... (252,295) -- 210,818 (41,477) Amortization..................... (26,781) (48) 12,843 (13,986) --------- ------ --------- -------- Income from service company business....................... 32,399 (48) (16,659) 15,692 --------- ------ --------- -------- General and administrative expenses....................... (66,272) (675) 5,561 (61,386) Interest expense................. (24,164) -- (707) (24,871) Interest income.................. 18,817 4,193 (509) 22,501 Minority interest ............... (14,159) -- -- (14,159) Equity in losses of unconsolidated partnerships.... 12,169 1,323 13,492 --------- ------ --------- -------- Income (loss) from operations.... (37,133) 4,030 (10,991) (44,094) Income tax provision............. (4,772) -- 5,952 1,180 Gain on disposition of property.. 5,888 688 -- 6,576 --------- ------ --------- -------- Item income (loss)............... $ (36,017) $4,718 $ (5,039) $(36,338) ========= ====== ========= ========
- --------------- (i) Represents the unaudited consolidated results of operations of IFG for the nine months ended September 30, 1998. 24 25 Certain reclassifications have been made to IFG's historical statement of operations to conform to the Partnership's statement of operations presentation. (ii) Represents the historical statement of operations of AMIT, as well as pro forma adjustments related to the AMIT Merger. The AMIT Merger closed prior to the IFG Merger. (iii) Represents the distribution of two shares of Holdings common stock for each three shares of IFG common stock to holders of IFG common stock. (F) Represents the following adjustments occurring as a result of the IFG Merger: (i) the incremental depreciation of the purchase price adjustment related to consolidated real estate and investments in real estate partnerships; (ii) the amortization of goodwill and property management contracts resulting from the IFG Merger; (iii) the increase in interest expense resulting from the net increase in debt; and (iv) the elimination of the income tax provision. (G) Represents adjustments related to the IFG Reorganization, whereby, following the IFG Merger, the Partnership contributed or sold to the combined Unconsolidated Subsidiaries certain assets and liabilities of IFG, primarily management contracts and related working capital assets and liabilities related to IFG's third party management operations. The adjustments reflect the related revenues and expenses primarily related to the management operations owned by IFG, with additional amortization recorded related to the Partnership's new basis resulting from the allocation of the purchase price of IFG. (H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998 Dispositions as if they had occurred on January 1, 1998. These pro forma operating results are based on historical results of the properties, except for depreciation, which is based on the Partnership's investment in the properties. These adjustments are as follows:
1998 1998 ACQUISITIONS DISPOSITIONS TOTAL ------------ ------------ ------- Rental and other property revenues...... $19,014 $(951) $18,063 Property operating expense.............. (8,492) 376 (8,116) Owned property management expense....... (707) 37 (670) Depreciation............................ (3,945) 93 (3,852)
(I) Represents adjustments to reflect the Probable Purchases as if they had occurred on January 1, 1998. These pro forma operating results are based on historical results of the properties, except for depreciation, which is based on the Partnership's investment in the properties. (J) Represents adjustments to interest expense for the following: Borrowings on the Partnership's credit facilities and other loans and mortgages assumed in connection with the 1998 Acquisitions..................................... $(7,894) Repayments on the Partnership's credit facilities and other indebtedness with proceeds from the 1998 Dispositions and the 1998 Stock Offerings................. 10,326 ------- $ 2,432 =======
(K) Represents adjustments to interest expense related to the assumption of mortgage debt in connection with the probable purchases. (L) Represents income related to limited partners in consolidated partnerships acquired in connection with the 1998 Acquisitions. (M) Represents incremental depreciation related to the real estate assets purchased in connection with the Ambassador Merger. Buildings and improvements are 25 26 depreciated on the straight-line method over a period of 30 years, and furniture and fixtures are depreciated on the straight-line method over a period of 5 years. (N) Decrease results from identified historical costs of certain items which will be eliminated or reduced as a result of the Ambassador Merger, as follows: Duplication of public company expenses...................... $ 355 Reduction in salaries and benefits.......................... 2,482 Merger related costs........................................ 1,212 Other....................................................... 1,229 ------ $5,278 ======
The reduction in salaries and benefits is pursuant to a restructuring plan, approved by the Company's senior management, assuming that the Ambassador Merger had occurred on January 1, 1998 and that the restructuring plan was completed on January 1, 1998. The restructuring plan specifically identifies all significant actions to be taken to complete the restructuring plan, including the reduction of personnel, job functions, location and date of completion. (O) Represents the decrease in interest expense of $1,480 related to the repayment of the Ambassador revolving lines of credit upon consummation of the Ambassador Merger, offset by an increase in interest expense of $1,335 related to borrowings under the Partnership's line of credit. (P) Represents elimination of minority interest in Jupiter-I, L.P. resulting from the redemption of limited partnership interests not owned by Ambassador in connection with the Ambassador Merger. (Q) Represents incremental depreciation related to the consolidated real estate assets purchased in connection with the IFG Merger and IPT Merger, based on the Partnership's new basis resulting from the allocation of the purchase price of IFG and IPT. Buildings and improvements are depreciated on the straight-line method over a period of 20 years, and furniture and fixtures are depreciated on the straight-line method over a period of 5 years. (R) Represents incremental depreciation and amortization of the tangible and intangible assets related to the property management business of IFG, based on the Partnership's new basis resulting from the allocation of the purchase price of IFG, including amortization of property management contracts of $27,084, amortization of goodwill of $9,873, and depreciation of furniture, fixtures, and equipment of $2,842, less IFG's historical depreciation and amortization of $13,938. Property management contracts are amortized using the straight-line method over a period of three years. Furniture, fixtures, and equipment are depreciated using the straight-line method over a period of three years. Goodwill is amortized using the straight-line method over 20 years. (S) Represents the elimination of merger related expenses recorded by IFG during the nine months ended September 30, 1998. In connection with the IFG Merger, certain IFG executives will receive one-time lump-sum payments in connection with the termination of their employment and option agreements. The total of these lump sum payments is estimated to be approximately $50,000. 26 27 (T) Represents elimination of minority interest in IPT resulting from the IPT merger. (U) Represents amortization related to the increased basis in investment in real estate partnerships, as a result of the allocation of the purchase price of IFG and IPT, based on an estimated average life of 20 years, and based on the Partnership's new basis resulting from the allocation of the purchase price of IFG and IPT. (V) Represents the reversal of IFG's income tax provision. (W) Represents the historical income and expenses associated with certain assets and liabilities of IFG that were contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations of IFG. (X) Represents the depreciation and amortization of certain management contracts and furniture, fixtures, and equipment that were contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations of IFG, based on the Partnership's new basis resulting from the allocation of the purchase price of IFG. (Y) Represents interest income of $2,861 earned on notes payable of $45,000 to the Partnership issued as consideration for certain assets and liabilities sold to the Unconsolidated Subsidiaries of the Partnership, net of the elimination of the Partnership's share of the related interest expense of $2,718 reflected in the equity in earnings of the Unconsolidated Subsidiaries. (Z) Represents the Partnership's equity in earnings of the Unconsolidated Subsidiaries. (AA) The following table presents the net impact to pro forma net income applicable to holders of shares of AIMCO Common Stock and net income per share of AIMCO Common Stock assuming the interest rate per annum increases by 0.25%: Increase in interest........................................ $ 702 ======== Net income.................................................. $ 35,130 ======== Net income attributable to OP Unitholders................... $ 4,216 ======== Basic loss per OP Unit...................................... $ 0.06 ======== Diluted loss per OP Unit.................................... $ 0.06 ========
(BB) Represents the net income attributable to holders of the Class B Preferred Units, the Class C Preferred Units, the Class D Preferred Units 27 28 the Class G Preferred Units, the Class H Preferred Units and the Class J Preferred Units as if these stock offerings had occurred as of January 1, 1997. (CC) Represents the Partnership's equity in earnings in the Unconsolidated Subsidiaries of $(1,180) plus the elimination of intercompany interest of $2,718. The combined Pro Forma Statement of Operations of the Unconsolidated Subsidiaries for the nine months ended September 30, 1998 is presented below, which represents the effects of the Ambassador Merger, the IFG Merger and the IFG Reorganization as if these transactions had occurred as of January 1, 1997. 28 29 UNCONSOLIDATED SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS)
IFG HISTORICAL(i) REORGANIZATION(ii) PRO FORMA ------------- ------------------ ---------- Rental and other property revenues.... $ 9,910 $ -- $ 9,910 Property operating expense............ (5,139) -- (5,139) Owned property management expense..... (345) -- (345) Depreciation expense.................. (1,026) -- (1,026) -------- -------- -------- Income from property operations....... 3,400 -- 3,400 -------- -------- -------- Management fees and other income...... 57,665 56,211 (iii) 113,876 Management and other expenses......... (36,221) (35,192)(iii) (71,413) Amortization.......................... (2,111) (21,266)(iv) (23,377) -------- -------- -------- Income from service company........... 19,333 (247) 19,086 General and administrative expense.... -- (13,800)(iii) (13,800) Interest expense...................... (6,931) (2,861)(v) (9,792) Interest income....................... 617 -- 617 Minority interest..................... (526) -- (526) -------- -------- -------- Income (loss) from operations......... 15,893 (16,908) (1,015) Income tax provision.................. (7,037) 6,810 (vi) (227) -------- -------- -------- Net income (loss)..................... $ 8,856 $(10,098) $ (1,242) ======== ======== ======== Income (loss) attributable to preferred stockholders.............. $ 8,413 $ (9,593) $ (1,180) ======== ======== ======== Income (loss) attributable to common stockholders........................ $ 443 $ (505) $ (62) ======== ======== ========
- ------------------------- (i) Represents the Unconsolidated Subsidiaries historical consolidated results of operations. (ii) Represents adjustments related to the IFG Reorganization, whereby, following the IFG Merger, the Partnership contributed or sold to the combined Unconsolidated Subsidiaries certain assets and liabilities of IFG, primarily related to the management operations owned by IFG. The adjustments reflect the related revenues and expenses primarily related to the management operations owned by IFG, with additional amortization recorded related to the Partnership's new basis resulting from the allocation of the purchase price of IFG. (iii) Represents the historical income and expenses associated with certain assets and liabilities of IFG that were contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations of IFG. 29 30 (iv) Represents the depreciation and amortization of certain management contracts and furniture, fixtures, and equipment contributed or sold to the Unconsolidated Subsidiaries, primarily related to the management operations of IFG, based on the Partnership's new basis resulting from the allocation of the purchase price of IFG. (v) Represents adjustment for interest expense related to a note payable to the Partnership. (vi) Represents the estimated Federal and state tax provisions, which are calculated on the pro forma operating results of the Unconsolidated Subsidiaries, excluding amortization of goodwill, which is not deductible for tax purposes. 30 -----END PRIVACY-ENHANCED MESSAGE-----