As filed with the Securities and Exchange Commission on October 27, 2010

Registration No. 333-16953

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Amendment No. 2

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

AIMCO PROPERTIES, L.P.

(Exact name of registrant as specified in its charter)

 

 

 

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

(303) 757-8101

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

John Bezzant

Senior Vice President

Apartment Investment and Management Company

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

(303) 757-8101

(Name, address, including zip code and telephone number, including area code of agent for service)

 

Copies to:

 

 

 

 

 

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

 

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

 

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

 

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

 

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

 

(Do not check if a smaller reporting company)

 

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

 

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

 

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

 

 

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

 

 

SUBJECT TO COMPLETION, DATED OCTOBER 27, 2010

 

INFORMATION STATEMENT/PROSPECTUS

 

CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES, LP

 

Consolidated Capital Institutional Properties, LP, or CCIP, has entered into an agreement and plan of merger with a wholly owned subsidiary of Aimco Properties, L.P., or Aimco OP. Under the merger agreement, the Aimco Subsidiary, Aimco CCIP Merger Sub LLC, will be merged with and into CCIP, with CCIP as the surviving entity. The Aimco Subsidiary was formed for the purpose of effecting this transaction and does not have any assets or operations. In the merger, each Series A Unit of CCIP will be converted into the right to receive, at the election of the holder of such unit, either:

 

 

The number of OP Units offered for each Series A Unit will be calculated by dividing $4.31 by the average closing price of common stock of Apartment Investment and Management Company, or Aimco, as reported on the New York Stock Exchange, over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the merger. For example, as of October 25, 2010, the average closing price of Aimco common stock over the preceding ten consecutive trading days was $22.96, which would have resulted in 0.19 OP Units offered for each Series A Unit. However, if AIMCO OP determines that the law of the state or other jurisdiction in which a limited partner resides would prohibit the issuance of OP Units in that state or other jurisdiction (or that registration or qualification in that state or jurisdiction would be prohibitively costly), then such limited partner will not be entitled to elect OP Units, and will receive cash.

 

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

 

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

 

In addition, limited partners who are not affiliated with Aimco OP may elect to receive an additional cash payment of $2.16 in exchange for executing a waiver and release of certain claims. In order to receive such additional payment, limited partners must complete the relevant section of the election form, execute the waiver and release that is attached to the election form and return both the election form and the executed waiver and release to the information agent as described above.

 

Under Delaware law, the merger must be approved by CCIP’s general partner and a majority in interest of the Series A Units. The general partner has determined that the merger is advisable and in the best interests of CCIP and its limited partners and has approved the merger and the merger agreement. As of October 20, 2010, there were issued and outstanding 199,030.2 Series A Units, and Aimco OP and its affiliates owned 152,648.05 of those units, or approximately 76.7% of the number of units outstanding. Aimco OP and its affiliates have indicated that they intend to take action by written consent, as permitted under the partnership agreement, to approve the merger on or about          , 2010. As a result, approval of the merger is assured, and your consent to the merger is not required.

 

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

 

This information statement/prospectus contains information about the merger and the securities offered hereby, and the reasons that the CCIP general partner has decided that the merger is in the best interests of CCIP and its limited partners. CCIP’s general partner has conflicts of interest with respect to the merger that are described in greater detail herein. Please read this information statement/prospectus carefully, including the section entitled “Risk Factors” beginning on page 17. It provides you with detailed information about the merger and the securities offered hereby. The merger agreement is attached to this information statement/prospectus as Annex A.

 

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

 

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

 

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

 

CALIFORNIA

MASSACHUSETTS

NEW YORK

 

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

 

ADDITIONAL INFORMATION

 

This information statement/prospectus incorporates important business and financial information about Aimco and Aimco OP from documents that they have filed with the Securities and Exchange Commission but that have not been included in or delivered with this information statement/prospectus. For a listing of documents incorporated by reference into this information statement/prospectus, please see “Where You Can Find Additional Information” beginning on page 96 of this information statement/prospectus.

 

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

 

ISTC Corporation

P.O. Box 2347

Greenville, South Carolina 29602

(864) 239-1029

 

If you have any questions or require any assistance, please contact our information agent, Eagle Rock Proxy Advisors, LLC, by mail at 10 Commerce Drive, Cranford, New Jersey 07016; by fax at (908) 497-2314; or by telephone at (800) 217-9608.

 

ABOUT THIS INFORMATION STATEMENT/PROSPECTUS

 

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

 

TABLE OF CONTENTS

 

 

SUMMARY TERM SHEET

	•	The Merger:  CCIP has entered into an agreement and plan of merger with the Aimco Subsidiary and Aimco OP. Under the merger agreement, at the effective time of the merger, the Aimco Subsidiary will be merged with and into CCIP, with CCIP as the surviving entity. A copy of the merger agreement is attached as Annex A to this information statement/prospectus. You are encouraged to read the merger agreement carefully in its entirety because it is the legal agreement that governs the merger.

	•	Merger Consideration:  In the merger, each Series A Unit will be converted into the right to receive, at the election of the holder of such Series A Unit, either $4.31 in cash or equivalent value in OP Units. The number of OP Units issuable with respect to each Series A Unit will be calculated by dividing the $4.31 per unit cash merger consideration by the average closing price of Aimco common stock, as reported on the NYSE over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the merger. For a full description of the determination of the merger consideration, see “The Merger — Determination of Merger Consideration” beginning on page 39.

	•	Effects of the Merger:  After the merger, Aimco OP will be the sole limited partner in CCIP, and will own all of the outstanding Series A Units. As a result, after the merger, you will cease to have any rights in CCIP as a limited partner. See “Special Factors — Effects of the Merger,” beginning on page 5.

	•	Appraisal Rights:  Pursuant to the terms of the merger agreement, Aimco OP will provide each limited partner with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights available to a stockholder of a constituent corporation in a merger under Delaware law, and which will enable a limited partner to obtain an appraisal of the value of the limited partner’s Series A Units in connection with the merger. See “The Merger — Appraisal Rights,” beginning on page 43. A description of the appraisal rights being provided, and the procedures that a limited partner must follow to seek such rights, is attached to this information statement/prospectus as Annex B.
	•	Additional Payment for Waiver and Release:  In addition to the merger consideration, each limited partner unaffiliated with Aimco OP or its affiliates may elect to receive an additional cash payment of $2.16 per Series A Unit in exchange for executing a waiver and release of potential claims such unaffiliated limited partner may have had in the past, may now have or may have in the future (through and including the date of the consummation of the merger) against CCIP, ConCap, Aimco OP or its affiliates and certain other persons and entities, including but not limited to claims related to the merger agreement and the transactions contemplated thereby, but excluding claims limited partners may have under federal securities laws. See “The Merger — Waiver and Release and Additional Consideration,” beginning on page 41.
	•	Parties Involved:

	•	Consolidated Capital Institutional Properties, LP, or CCIP, is a Delaware limited partnership formed on March 19, 2008, following a redomestication of the partnership in Delaware. CCIP owns and operates three investment properties: the Sterling Apartment Homes and Commerce Center, which consists of a 536 unit apartment project and a 137,068 square foot commercial space located in Philadelphia, Pennsylvania, or the Sterling Property; the Plantations Gardens Apartments, a 372 unit apartment project located in Plantation, Florida, or the Plantation Gardens Property; and the Regency Oak Apartments, a 343 unit apartment project located in Fern Park, Florida, or the Regency Oaks Property. See “Information About CCIP,” beginning on page 30. CCIP’s principal address is 55 Beattie Place, P.O. Box 1089, Greenville, South Carolina 29602, and its telephone number is (864) 239-1000.

	•	Apartment Investment and Management Company, or Aimco, is a Maryland corporation that is a self-administered and self-managed real estate investment trust, or REIT, focused on the ownership and management of quality apartment communities located in the 20 largest markets in the United States. Aimco is one of the largest owners and operators of apartment properties in the United States. Aimco’s common stock is listed and traded on the NYSE under the symbol “AIV.” See “Information about the Aimco Entities,” beginning on page 28.
	•	AIMCO Properties, L.P., or Aimco OP, is a Delaware limited partnership which, through its operating divisions and subsidiaries, holds substantially all of Aimco’s assets and manages the daily operations of Aimco’s business and assets. See “Information about the Aimco Entities,” beginning on page 29.
	•	AIMCO CCIP Merger Sub LLC, or the Aimco Subsidiary, is a Delaware limited liability company formed for the purpose of consummating the merger with CCIP. The Aimco Subsidiary is a direct wholly-owned subsidiary of Aimco OP. See “Information about the Aimco Entities,” beginning on page 29.

	•	Reasons for the Merger:  Under its partnership agreement, CCIP’s term expires December 31, 2011. As a result, ConCap, as the general partner of CCIP, would be obligated to liquidate and wind-up the partnership at that time. ConCap and the other Aimco Entities identified two principal concerns with a liquidation of CCIP: (i) based on the age and condition of the properties owned by CCIP, the net proceeds from their sale (after deducting sales and other transaction costs) might not be sufficient to satisfy all of CCIP’s liabilities, and the remaining proceeds available for distribution to limited partners, if any, would probably not be very significant; and (ii) in liquidation, limited partners would recognize taxable gain, and that gain could exceed any proceeds from liquidation. On the other hand, Aimco and Aimco OP are in the business of acquiring apartment properties such as those owned by CCIP, and have decided to proceed with the merger as a means of acquiring the properties currently owned by CCIP in a manner that (i) provides fair value to limited partners, (ii) offers limited partners an opportunity to receive immediate liquidity, or defer recognition of taxable gain (except where the law of the state or other jurisdiction in which a limited partner resides would prohibit the issuance of OP Units in that state or other jurisdiction, or where registrations or qualification would be prohibitively costly), and (iii) relieves CCIP of the expenses associated with a sale of the properties, including marketing and other transaction costs.

	•	Fairness of the Merger:  Although the Aimco Entities have interests that may conflict with those of CCIP’s unaffiliated limited partners, each of the Aimco Entities believe that the merger is fair to the unaffiliated limited partners of CCIP. See “Special Factors — Fairness of the Transaction” beginning on page 7.

	•	Conflicts of Interest:  ConCap is the general partner of CCIP and is wholly-owned by AIMCO/IPT, Inc., which in turn is wholly-owned by Aimco. Therefore, ConCap has a conflict of interest with respect to the merger. ConCap has fiduciary duties to AIMCO/IPT, Inc., ConCap’s sole stockholder and an affiliate of Aimco, on the one hand, and to CCIP and its limited partners, on the other hand. The duties of ConCap to CCIP and its limited partners conflict with the duties of ConCap to AIMCO/IPT, Inc., which could result in ConCap approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. See, “The Merger — Conflicts of Interest,” beginning on page 41.
	•	Risk Factors:  In evaluating the merger agreement and the merger, CCIP limited partners should carefully read this information statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors” beginning on page 17. Some of the risk factors associated with the merger are summarized below:

	•	Aimco owns ConCap, the general partner of CCIP. As a result, ConCap has a conflict of interest in the merger. A transaction with a third party in the absence of this conflict could result in better terms or greater consideration to CCIP limited partners.

	•	CCIP limited partners who receive cash may recognize taxable gain in the merger and that gain could exceed the merger consideration.

	•	There are a number of significant differences between CCIP Series A Units and Aimco OP Units relating to, among other things, the nature of the investment, voting rights, distributions and liquidity and

		transferability/redemption. For more information regarding those differences, see “Comparison of CCIP Series A Units and Aimco OP Units,” beginning on page 63.

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

	•	Material United States Federal Income Tax Consequences of the Merger:  The merger will generally be treated as a partnership merger for Federal income tax purposes. In general, any payment of cash for Series A Units will be treated as a sale of such Series A Units by such holder, and any exchange of Series A Units for OP Units under the terms of the merger agreement will be treated, in accordance with Sections 721 and 731 of the Internal Revenue Code of 1986, as amended, or the Code, as a tax free transaction, except to the extent described in “Material United States Federal Income Tax Matters — Taxation of Aimco OP and OP Unitholders — United States Federal Income Tax Consequences Relating to the Merger,” beginning on page 68.

 

Under its partnership agreement, CCIP’s term expires December 31, 2011. As a result, ConCap, as the general partner of CCIP, would be obligated to liquidate and wind-up the partnership at that time. ConCap and the other Aimco Entities identified two principal concerns with a liquidation of CCIP: (i) based on the age and condition of the properties owned by CCIP, the net proceeds from their sale (after deducting sales and other transaction costs) might not be sufficient to satisfy all of CCIP’s liabilities, and the remaining proceeds available for distribution to limited partners, if any, would probably not be very significant; and (ii) in liquidation, limited partners would recognize taxable gain, and that gain could exceed any proceeds from liquidation. On the other hand, Aimco and Aimco OP are in the business of acquiring apartment properties such as those owned by CCIP, and have decided to proceed with the merger as a means of acquiring the properties currently owned by CCIP in a manner that (i) provides fair value to limited partners, (ii) offers limited partners an opportunity to receive immediate liquidity, or defer recognition of taxable gain (except where the law of the state or other jurisdiction in which a limited partner resides would prohibit the issuance of OP Units in that state or other jurisdiction, or where registrations or qualification would be prohibitively costly), and (iii) relieves CCIP of the expenses associated with a sale of the properties, including marketing and other transaction costs.

 

The Aimco Entities determined to proceed with a transaction at this time because of the proximity of CCIP’s upcoming termination date. They also wanted to try to effect a transaction before the end of 2010 so that unaffiliated limited partners who recognize taxable gain in the transaction would not be subject to expected higher capital gains tax rates in 2011. As discussed in more detail, below, the Aimco Entities had previously pursued a sale of the Regency Oaks Property but had failed to find a buyer at an acceptable price. The Aimco Entities had not previously pursued a sale of the Sterling Property or the Plantation Gardens Property because they did not think that they could be sold at prices that would provide net proceeds sufficient to repay the related mortgage debt (taking into account the prepayment penalties associated with those loans) and other liabilities.

 

Before deciding to proceed with the merger, ConCap and the other Aimco Entities considered the alternatives described below:

 

Continue to operate CCIP after its term expires.  As an alternative to the merger, the Aimco Entities considered the possibility of continuing to operate CCIP after its term expires. The Aimco Entities rejected this alternative because it would violate the partnership agreement, could result in a default under existing indebtedness and would make it difficult or impossible to refinance such indebtedness.

 

Amend CCIP’s partnership agreement to extend the term.  Although the CCIP partnership agreement may generally be amended upon the approval of a majority in interest of the limited partners, the agreement provides that the limited partners may not amend the agreement to extend the partnership term. Notwithstanding this provision, the Aimco Entities did consider having ConCap seek approval from 100% of the limited partners to amend CCIP’s partnership agreement to extend the term or make CCIP’s existence perpetual. The Aimco Entities determined, however, that it would be virtually impossible to obtain unanimous consent from all of the 6,990 unaffiliated limited partners.

 

Liquidation of CCIP.  As discussed above, ConCap and the other Aimco Entities considered a liquidation of CCIP in which CCIP’s properties would be marketed and sold to third parties for cash, with any net proceeds remaining, after payment of all liabilities, distributed to CCIP’s limited partners. The primary advantage of such a transaction would be that the sale prices would reflect arm’s-length negotiations and might therefore be higher than the appraised values which have been used to determine the merger consideration. ConCap and the Aimco Entities rejected this alternative because of: (i) the risk that a third party purchaser might not be found that would offer a satisfactory price; (ii) the costs imposed on CCIP in connection with marketing and selling the properties; and (iii) the fact that limited partners would recognize taxable gain on the sales.

 

ConCap and the other Aimco Entities recently evaluated a sale of the Regency Oaks Property to a third party but determined that a third-party buyer would be unwilling to buy the property at a price that would

provide net proceeds sufficient to repay the loan secured by that property (taking into account the prepayment penalty associated with the loan). Also, ConCap determined an assumption of the existing loan would require a partial loan paydown because of lender loan-to-value requirements. Such a paydown would trigger a prepayment penalty that would result in no net proceeds to CCIP from the sale. These conclusions were consistent with on CCIP’s previous efforts to sell the Regency Oaks Property in late 2008 through early 2009. For example, in October of 2008, with the assistance of a broker and real estate consultant, ConCap went out to market with a listing agreement and distributed email notices to over 10,500 owners and investors in connection with the Regency Oaks Property. In response, ConCap received only three preliminary indications of interest: one offering $11.6 million and assumption of debt, another a cash-only offer of $12.075 million, and the other a cash-only offer of $13.0 million. The outstanding mortgage debt associated with the Regency Oaks Property at that time was approximately $11.32 million, and the estimated prepayment penalty related to that debt was approximately $1.85 million. Accordingly, none of the indications of interest made sense on the terms proposed, as the mortgage lender indicated it would not accept the loan-to-value or debt coverage ratios without additional severe penalty payments. Accordingly, ConCap stopped marketing the property in March 2009. ConCap and the other Aimco Entities also determined that a sale of the Plantation Gardens Property to a third party would likely be very difficult given that the property is encumbered by mortgage indebtedness nearly equal to its appraised value and the property is in immediate need of substantial capital improvements.

 

Contribution of properties to Aimco OP.  The Aimco Entities considered a transaction in which CCIP’s properties would be contributed to Aimco OP in exchange for OP Units. The primary advantage of such a transaction would be that CCIP limited partners would not recognize taxable gain. The Aimco Entities rejected this alternative because it would not offer an opportunity for immediate liquidity to those limited partners who desire it.

 

The Aimco Entities believe that the merger will have the following benefits and detriments to unaffiliated limited partners, CCIP and the Aimco Entities:

 

Benefits to Unaffiliated Limited Partners.  The merger is expected to have the following principal benefits to unaffiliated limited partners:

 

Liquidity.  Limited partners are given a choice of merger consideration, and may elect to receive either cash or OP Units in the merger, except in those jurisdictions where the law prohibits the offer of OP Units (or registration would be prohibitively costly). Limited partners who receive cash consideration will receive immediate liquidity with respect to their investment.

 

Option to Defer Taxable Gain.  Limited partners who receive OP Units in the merger may defer recognition of taxable gain (except where the law of the state or other jurisdiction in which a limited partner resides would prohibit the issuance of OP Units in that state or other jurisdiction, or where registrations or qualification would be prohibitively costly).

 

Diversification.  Limited partners who receive OP Units in the merger will have the opportunity to participate in Aimco OP, which has a more diversified property portfolio than CCIP.

 

Benefits to CCIP.  The merger is expected to have the following principal benefits to CCIP:

 

Elimination of Costs Associated with SEC Reporting Requirements and Multiple Limited Partners.  CCIP will terminate registration after the merger is completed, and will cease filing periodic reports with the SEC. As a result, CCIP will no longer incur costs associated with preparing audited financial statements, unaudited quarterly financial statements, tax returns for partners on Schedule K-1, periodic SEC reports and other expenses. The Aimco Entities estimate these expenses to be approximately $223,000 per year.

Benefits to the Aimco Entities.  The merger is expected to have the following principal benefits to the Aimco Entities:

 

Increased Interest in CCIP.  Upon completion of the merger, Aimco OP will be the sole limited partner of CCIP. As a result, the Aimco Entities will receive all of the benefit from any future appreciation in value of the properties after the merger, and any future property income.

 

Detriments to Unaffiliated Limited Partners.  The merger is expected to have the following principal detriments to unaffiliated limited partners:

 

Taxable Gain.  Limited partners who receive cash consideration may recognize taxable gain in the merger and that gain could exceed the merger consideration. In addition, limited partners who receive OP Units in the merger could recognize taxable gain if Aimco subsequently sells any of the properties.

 

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

 

Conflicts of Interest; No Separate Representation of Limited Partners.  ConCap is the general partner of CCIP and is indirectly wholly-owned by Aimco. Therefore, ConCap has a conflict of interest with respect to the merger. ConCap has fiduciary duties to AIMCO/IPT, Inc., ConCap’s sole stockholder and an affiliate of Aimco, on the one hand, and to CCIP and its limited partners, on the other hand. The duties of ConCap to CCIP and its limited partners conflict with the duties of ConCap to AIMCO/IPT, Inc., which could result in ConCap approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. In negotiating the merger agreement, no one separately represented the interests of the limited partners. If an independent advisor had been engaged, it is possible that such advisor could have negotiated better terms for CCIP’s limited partners.

 

Detriments to CCIP.  The merger is not expected to have any detriments to CCIP.

 

Detriments to the Aimco Entities.  The merger is expected to have the following principal detriments to the Aimco Entities:

 

Increased Interest in CCIP.  Upon completion of the merger, the Aimco Entities’ interest in the net book value of CCIP will increase from 76.66% to 100%, or from a deficit of $61,745,000 to a deficit of $63,856,000 as of December 31, 2009, and their interest in the net losses of CCIP will increase from 76.93% to 100%, or from $4,414,000 to $5,738,000 for the period ended December 31, 2009. Upon completion of the merger, Aimco OP will be the sole limited partner of CCIP. As a result, Aimco OP will bear the burden of all future operating or other losses, as well as any decline in the value of CCIP’s properties.

 

Burden of Capital Expenditures.  Upon completion of the merger, the Aimco Entities will have sole responsibility for providing any funds necessary to pay for capital expenditures at the properties.

 

For a discussion of the material United States federal income tax consequences of the merger, see “Material United States Federal Income Tax Matters — United States Federal Income Tax Consequences Relating to the Merger,” beginning on page 68.

 

Factors in Favor of Fairness Determination.  The Aimco Entities (including ConCap as general partner of CCIP) believe that the merger is fair and in the best interests of CCIP and its unaffiliated limited partners. In support of such determination, the Aimco Entities considered the following factors:

 

 

 

 

 

 

 

 

 

 

 

Factors Not in Favor of Fairness Determination.  In addition to the foregoing factors, the Aimco Entities also considered the following countervailing factors:

 

 

 

 

 

 

 

 

The Aimco Entities did not assign relative weights to the above factors in making their conclusion that the merger is fair to CCIP and its unaffiliated limited partners. They relied primarily on their estimate of value calculated by adding the appraised value of CCIP’s properties and the value of all of its other assets, and deducting the amount of mortgage debt (taking into account any prepayment penalties) and all other liabilities. The Aimco Entities determined that it was appropriate to deduct prepayment penalties associated with the mortgage debt because the partnership term expires at the end of 2011, and there is no prospect for its continuing operation as a going concern.

 

The Aimco Entities were aware of, but did not place much emphasis on, information regarding prices at which CCIP units may have sold in the secondary markets because they do not view that information as a reliable measure of value. The Series A units are not traded on an exchange or other reporting system, and transactions in the securities are very limited and sporadic. In addition, some of the historical prices are not comparable to current value because of intervening events, including a property sale, distribution of proceeds and advances from ConCap.

 

Procedural Fairness.  The Aimco Entities determined that the merger is fair from a procedural standpoint despite the absence of any customary procedural safeguards, such as the engagement of an unaffiliated representative, the approval of independent directors or approval by a majority of unaffiliated limited partners. In making this determination, the Aimco Entities relied primarily on the dissenters’ appraisal rights provided to unaffiliated limited partners under the merger agreement that are similar to the dissenters’ appraisal rights available to stockholders in a corporate merger under Delaware law.

 

Selection and Qualifications of Independent Appraiser.  ConCap, in its capacity as the general partner of CCIP, retained the services of CRA to appraise the market value of each of CCIP’s properties. CRA is an experienced independent valuation consulting firm that has performed appraisal services for Aimco OP and its affiliates in the past. Aimco OP believes that its relationship with CRA had no negative impact on its independence in conducting the appraisals related to the merger.

 

Factors Considered.  CRA performed complete appraisals of the Sterling Property, the Plantation Gardens Property and the Regency Oaks Property. CRA has represented that its reports were prepared in conformity with the Uniform Standards of Professional Appraisal Practice, as promulgated by the Appraisal Standards Board of the Appraisal Foundation and the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. CCIP furnished CRA with all of the necessary information requested by CRA in connection

with the appraisals. The appraisals were not prepared in conjunction with a request for a specific value or a value within a given range. In preparing its valuation of each property, CRA, among other things:

 

 

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

 

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

 

As part of the income capitalization approach, CRA used the discounted cash flow and direct capitalization methods to estimate a value for the Sterling Property, the direct capitalization method to estimate a value for the Plantation Gardens Property and the direct capitalization method to estimate a value for the Regency Oaks Property. A discounted cash flow analysis is widely used as a method of valuing commercial real estate. Accordingly, CRA used a discounted cash flow method to estimate a value for the Sterling Property because the Sterling Property is comprised of both a residential/apartment component and an office/retail commercial component. By contrast, neither the Plantation Gardens Property nor the Regency Oaks Property have a commercial component, and so CRA did not use a discounted cash flow analysis to estimate values for those properties. According to CRA’s reports, the basic steps in the discounted cash flow analysis are as follows: (i) analysis of the projected rental income stream, establishment of market rent levels, estimation of an appropriate absorption period for the subject property upon lease expiration, projection of future revenues, probable lease renewals at market rates, and probable vacancy and credit losses; (ii) projection of future operating expenses based upon analysis of actual operating expenses reported by the subject property and comparable buildings in the subject property’s competitive market; (iii) derivation of the most probable annual net operating income to be generated by the subject property over the projection period by subtracting all property expenses from the effective gross income; (iv) estimation of a re-sale price at the end of the investment period by applying an appropriate overall capitalization rate to net operating income and deducting the appropriate selling costs; (v) determination of a yield rate (discount rate or internal rate of return) that would attract a prudent investor to invest in a similar situation with comparable degrees of risk, non-liquidity, and management; and (vi) estimating value by converting the cash flows and net resale price into a present value by discounting at the concluded yield rate.

 

According to CRA’s reports, the basic steps in the direct capitalization analysis are as follows: (i) calculate potential gross income from all sources that a competent owner could legally generate; (ii) estimate and deduct an appropriate vacancy and collection loss factor to arrive at effective gross income; (iii) estimate and deduct operating expenses that would be expected during a stabilized year to arrive at a probable net operating income; (iv) develop an appropriate overall capitalization rate to apply to the net operating income; and (v) estimate value by dividing the net operating income by the overall capitalization rate. In addition, any adjustments to account for differences between the current conditions and stabilized conditions are also considered. The assumptions utilized by CRA with

respect to each property are set forth below. The property-specific assumptions were determined by CRA to be reasonable based on its review of historical operating and financial data for each property and comparison of said data to the operating statistics of similar properties in the influencing market areas. The capitalization rate for each property was determined to be reasonable by CRA based on their review of applicable data ascertained within the market in which each property is located.

 

The sales comparison approach is an estimate of value based upon a process of comparing recent sales of similar properties in the surrounding or competing areas to the subject property. This comparative process involves judgment as to the similarity of the subject property and the comparable sales with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, and the interest transferred, among others. The value estimated through this approach represents the probable price at which the subject property would be sold by a willing seller to a willing and knowledgeable buyer as of the date of value. The reliability of this technique is dependent upon the availability of comparable sales data, the verification of the sales data, the degree of comparability and extent of adjustment necessary for differences, and the absence of atypical conditions affecting the individual sales prices. CRA reported that, although the volume of sales activity is down as a result of market conditions, its research revealed adequate sales activity to form a reasonable estimation of each of the subject property’s market value pursuant to the sales comparison approach.

 

For each of the appraisals, CRA conducted research in each market in an attempt to locate sales of properties similar to each of the appraised properties. The results of CRA’s research indicated that investment sales activity was down significantly in each of the individual markets in comparison to the volume of sales realized prior to the recession. For the Sterling Property, in particular, there were few recent sales of similar properties in the local market and as a result, the search for comparable transactions was expanded to include a broad geographic region. An adequate number of comparable sales were obtained from the local markets in which the Plantation Gardens Property and the Regency Oaks Property are located.

 

In each of the appraisals, numerous sales were uncovered and the specific sales included in the appraisal reports were deemed representative of the most comparable data available at the time the appraisals were prepared. Important criteria utilized in selecting the most comparable data included: conditions under which the sale occurred (i.e. seller and buyer were typically motivated); date of sale — every attempt was made to utilize recent sales transactions; sales were selected based on their physical similarity to the appraised property; transactions were selected based on the similarity of location between the comparable and appraised property; and, similarity of economic characteristics between the comparable and appraised property. Sales data that may have been uncovered during the course of research that was not included in the appraisal did not meet the described criteria and/or could not be adequately confirmed.

 

According to CRA’s reports, the basic steps in processing the sales comparison approach are outlined as follows: (i) research the market for recent sales transactions, listings, and offers to purchase or sell of properties similar to the subject property; (ii) select a relevant unit of comparison and develop a comparative analysis; (iii) compare comparable sale properties with the subject property using the elements of comparison and adjust the price of each comparable to the subject property; and (iv) reconcile the various value indications produced by the analysis of the comparables.

 

The final step in the appraisal process is the reconciliation of the value indicators into a single value estimate. CRA reviewed each approach in order to determine its appropriateness relative to each property. The accuracy of the data available and the quantity of evidence were weighted in each approach. For the appraisal of the Sterling Property, the Plantation Gardens Property and the Regency Oaks Property, CRA relied principally on the income capitalization approach to valuation. For the Sterling Property, the discounted cash flow method was given greatest consideration in the conclusion of value for this approach. For the Plantation Gardens Property and the Regency Oaks Property, only the direct capitalization approach was considered in the conclusion. For each property, CRA relied secondarily on the sales comparison approach, and reported that the value conclusion derived pursuant to the sales comparison approach is supportive of the conclusion derived pursuant to the income capitalization approach.

 

Summary of Independent Appraisals of the Properties.  CRA performed complete appraisals of the each of CCIP’s three properties. The appraisal report of the Sterling Property was dated in February 2010, the appraisal report of the Plantation Gardens Property was dated in April 2010 and revised in August 2010 and the appraisal

report of the Regency Oaks Property was dated in May 2010. The summaries set forth below describe the material conclusions reached by CRA based on the values determined under the valuation approaches and subject to the assumptions and limitations described below. The estimated aggregate market value of the Sterling Property is $93,900,000, the estimated aggregate market value of the Plantation Gardens Property is $23,100,000 and the estimated aggregate market value of the Regency Oaks Property is $11,700,000.

 

The Sterling Property.  The following is a summary of the appraisal report of the Sterling Property dated February 22, 2010:

 

Valuation Under Income Capitalization Approach.  Using the income capitalization approach, CRA performed both a discounted cash flow analysis and a direct capitalization analysis to derive a value for the Sterling Property. CRA reported that both methods of valuation were considered reasonable, appropriate and were mutually supportive. CRA gave the greatest consideration in the value conclusion under the income capitalization approach to the discounted cash flow analysis given that many institutional investors give the greatest weight to that method in the analysis of an asset like the Sterling Property.

 

The Sterling Property is comprised of both a residential/apartment component and an office/retail component. CRA separately determined the value of the residential/apartment component of the Sterling Property and the office/retail component of the Sterling Property, in each case, using both a discounted cash flow analysis and a direct capitalization analysis. CRA then reconciled the valuation conclusions, and then determined an aggregate value conclusion for the Sterling Property.

 

The direct capitalization analysis resulted in a valuation conclusion for the residential/apartment component of the Sterling Property of approximately $82,100,000, a valuation conclusion for the office/retail component of the Sterling Property of approximately $10,100,000, and an aggregate value conclusion for the Sterling Property of approximately $92,200,000.

 

The discounted cash flow analysis resulted in a valuation calculation for the residential/apartment component of the Sterling Property of approximately $83,600,000, a valuation conclusion for the office/retail component of the Sterling Property of approximately $10,300,000, and an aggregate value conclusion for the Sterling Property of approximately $93,900,000.

 

CRA gave the greatest consideration in the value conclusion under the income capitalization approach to the discounted cash flow analysis for the reasons discussed above. Accordingly, CRA calculated the aggregate value conclusion for the Sterling Property of approximately $93,900,000.

 

The assumptions employed by CRA to determine the value of the residential/apartment component of the Sterling Property under the income capitalization approach using a direct capitalization analysis included:

 

 

Using a direct capitalization analysis, CRA calculated the value of the residential/apartment component of the Sterling Property by dividing the stabilized net operating income by the concluded capitalization rate of 7.0%.

The assumptions employed by CRA to determine the value of the residential/apartment component of the Sterling Property under the income capitalization approach using a discounted cash flow analysis included:

 

 

The assumptions employed by CRA to determine the value of the office/retail component of the Sterling Property under the income capitalization approach using a direct capitalization analysis included:

 

 

Using a direct capitalization analysis, CRA calculated the value of the office/retail component of the Sterling Property by dividing the stabilized net operating income by the concluded capitalization rate of 8.50%.

 

The assumptions employed by CRA to determine the value of the office/retail component of the Sterling Property under the income capitalization approach using a discounted cash flow analysis included:

 

 

CRA calculated the aggregate value conclusion of the Sterling Property under the income capitalization approach of approximately $93,900,000 as of December 31, 2009.

 

Valuation Under Sales Comparison Approach.  CRA conducted a comparison of both recent regional apartment sales and recent regional commercial sales to arrive at an aggregate value conclusion for the Sterling Property under a sales comparison approach. CRA reported that transaction velocity has declined considerably over the past 12 to 18 months as a result of current economic conditions, and so there was limited sales activity for most types of commercial property in the Sterling Property’s local market. CRA expanded its search for sales to include other metropolitan areas within the northeastern United States. In addition to sales from the local Philadelphia market, data was ascertained from the Washington D.C. and New York City metro areas.

The sales comparison approach resulted in a valuation conclusion for the residential component of the Sterling Property of approximately $82,900,000, a valuation conclusion for the commercial component of the Sterling Property of approximately $11,000,000, and an aggregate valuation conclusion for the Sterling Property of approximately $93,900,000.

 

In reaching a valuation conclusion for the residential component of the Sterling Property, CRA examined and analyzed the sales of two low-rise garden style apartments within the Philadelphia area and the sale of three mid- and high-rise apartment buildings in the New York City and Washington D.C. markets as part of its analysis of regional apartment sales. CRA concluded that those sales were adequate to formulate a defensible value for the Sterling Property via sales comparison.

 

The sales reflected per unit unadjusted sales prices ranging from $65,625 to $182,708. After adjustment, the comparable sales illustrated a range from $111,563 to $173,573 per unit with mean and median adjusted sale prices of $139,020 and $125,000 per unit, respectively. CRA reported that the two sales which required the least adjustment were accorded the most significance. The adjusted indicators exhibited by those sales ranged from $164,963 to $173,573 per unit. When tempered against the indicators exhibited by the remaining sales, a value indication in the range of approximately $150,000 to $160,000 per unit was indicated. CRA estimated a value of $155,000 per unit for the residential component of the Sterling Property. Applied to the Sterling Property’s 535 units, this resulted in CRA’s total value estimate for the residential component of the Sterling Property of approximately $82,900,000.

 

CRA also performed an EGIM analysis. The EGIM (Effective Gross Income Multiplier) is the ratio of the sale price of a property to its effective gross income at the time of sale. The EGIM is used to compare the income-producing characteristics of properties. In each of the appraisals, including the appraisal of the Sterling Property, the indicated EGIM for the appraised property, calculated by dividing the value concluded for the appraised property via the sale comparison approach by its projected effective gross income, was compared to the EGIMs produced by the sales data. In each of the appraisals, including the Sterling Property appraisal, the appraised property’s indicated EGIM fell within the range of EGIMs produced by the sales data under analysis. This comparison was made to check the reasonableness of the values concluded for the appraised properties via comparative analysis. The EGIM analysis resulted in an indicated EGIM of approximately 8.3 on a stabilized basis. CRA reported that indicated EGIM was within the range of 5.5 to 9.6 produced by the sales data under analysis, and that that indicator suggests that the value concluded for the residential component of the property via comparative analysis was reasonable based on the Sterling Property’s income-producing characteristics.

 

In reaching a valuation conclusion for the commercial component of the Sterling Property, CRA examined and analyzed four transactions for office and retail properties in the metropolitan Philadelphia area. CRA concluded that those sales were adequate to formulate a defensible value for the Sterling Property via sales comparison.

 

The sales reflected unadjusted sales prices ranging from $76.22 to $100.59 per square foot. After adjustment, the comparable sales illustrated a range from $76.22 to $100.59 per square foot with mean and median adjusted sale prices of $92.62 and $96.82 per square foot, respectively. CRA reported that one of the sales was located in the downtown area of Philadelphia, just blocks from the Sterling Property and was one of the more recent transactions in the area, and so that sale was accorded the most significance in the analysis. The adjusted indicator exhibited by that sale was $96.84 per square foot. A value in the range of approximately $90.00 to $100.00 per square foot was indicated for the commercial component at the Sterling Property, and a final value of $95.00 per square foot was concluded for the commercial component at the Sterling Property. Applied to the Sterling Property’s 115,550 square feet, this resulted in CRA’s total value estimate for the commercial component of the Sterling Property of approximately $11,000,000.

 

CRA calculated the aggregate value conclusion of the Sterling Property under the sales comparison approach of approximately $93,900,000 as of December 31, 2009.

 

Reconciliation of Values and Conclusion of Appraisal.  For the appraisal of the Sterling Property, CRA relied principally on the income capitalization approach to valuation, and the discounted cash flow method was given greatest consideration in the conclusion of value for this approach. CRA relied secondarily on the sales comparison approach, and reported that the value conclusion derived pursuant to the sales comparison approach is supportive of the conclusion derived pursuant to the income capitalization approach. The income capitalization approach using a

discounted cash flow analysis result in a value of $93,900,000, and the sales comparison approach resulted in a value of $93,900,000. CRA concluded that the market value of the Sterling Property as of December 31, 2009 was $93,900,000.

 

The Plantation Gardens Property.  The following is a summary of the appraisal report of the Plantation Gardens Property dated April 17, 2010 and revised as of August 30, 2010:

 

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

 

The direct capitalization analysis resulted in a valuation conclusion for the Plantation Gardens Property of approximately $24,700,000 (as of March 2010).

 

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

 

 

Using a direct capitalization analysis, CRA calculated the value of the Plantation Gardens Property by dividing the stabilized net operating income by the concluded capitalization rate of 7.75%.

 

CRA calculated the value conclusion of the Plantation Gardens Property under the income capitalization approach of approximately $24,700,000 (as of March 2010).

 

Valuation Under Sales Comparison Approach.  CRA estimated the property value of the Plantation Gardens Property under the sales comparison approach by analyzing sales from the influencing market that were most similar to the Plantation Gardens Property in terms of age, size, tenant profile and location. CRA reported that the local market has been active in terms of investment sales of similar properties, and that adequate sales existed to formulate a defensible value for the Plantation Gardens Property under the sales comparison approach.

 

The sales comparison approach resulted in a valuation conclusion for the Plantation Gardens Property of approximately $24,500,000 (as of March 2010).

 

In reaching a valuation conclusion for the Plantation Gardens Property, CRA examined and analyzed comparable sales of four properties in the influencing market. The sales reflected per unit unadjusted sales prices ranging from $71,923 to $103,092. After adjustment, the comparable sales illustrated a range from $61,942 to $81,965 per unit with mean and median adjusted sale prices of $70,201 and $68,448 per unit, respectively. CRA estimated a value of $70,000 per unit. Applied to the Plantation Gardens Property’s 372 units, this resulted in CRA’s total value estimate for the Plantation Gardens Property of approximately $24,500,000 (as of March 2010).

 

CRA also performed an EGIM analysis, which resulted in an indicated EGIM of approximately 6.4 on a stabilized basis. CRA reported that that indicated EGIM was aligned toward the middle of the range of 4.5 to 7.3 exhibited by the comparable transactions, and that indicator suggests that the value concluded for the property via comparative analysis was reasonable based on the Plantation Gardens Property’s income-producing characteristics.

 

Reconciliation of Values and Conclusion of Appraisal.  For the appraisal of the Plantation Gardens Property, CRA relied principally on the income capitalization approach to valuation, and the direct capitalization method was given greatest consideration in the conclusion of value for this approach. CRA relied secondarily on the sales comparison approach, and reported that the value conclusion derived pursuant to the sales comparison approach is

supportive of the conclusion derived pursuant to the income capitalization approach. The income capitalization approach using a direct capitalization analysis result in a value of $24,700,000, and the sales comparison approach resulted in a value of $24,500,000 (each as of March 2010). CRA concluded that the market value of the Plantation Gardens Property as of March 22, 2010 was $24,700,000.

 

In July 2010, Aimco became aware of immediate capital expenditure needs at the Plantation Gardens Property and informed CRA of those needs. After taking into account the additional capital needs, CRA revised its appraised value of the Plantation Gardens Property and concluded that the market value of the Plantation Gardens Property as of March 22, 2010 was $23,100,000.

 

The Regency Oaks Property.  The following is a summary of the appraisal report of the Regency Oaks Property dated May 17, 2010:

 

Valuation Under Income Capitalization Approach.  Using the income capitalization approach, CRA performed the direct capitalization method to estimate a value for the Regency Oaks Property. The direct capitalization method resulted in a valuation conclusion for the Regency Oaks property of approximately $11,700,000 as of April 26, 2010.

 

The assumptions employed by CRA to determine the value of the Regency Oaks Property under the income capitalization approach using the direct capitalization method included:

 

 

Using the direct capitalization method, CRA calculated the value of the Regency Oaks Property by dividing the stabilized net operating income by the concluded overall capitalization rate of 8.25%.

 

CRA calculated the value conclusion of the Regency Oaks Property under the income capitalization approach of approximately $11,700,000 as of April 26, 2010.

 

Valuation Under Sales Comparison Approach.  CRA estimated the property value of the Regency Oaks Property under the sales comparison approach by analyzing sales from the influencing market that were most similar to the Regency Oaks Property in terms of age, size, tenant profile and location. CRA reported that the local market has been active in terms of investment sales of similar properties, and that adequate sales existed to formulate a defensible value for the Regency Oaks Property under the sales comparison approach.

 

The sales comparison approach resulted in a valuation conclusion for the Regency Oaks Property of approximately $12,000,000 as of April 26, 2010.

 

In reaching a valuation conclusion for the Regency Oaks Property, CRA examined and analyzed comparable sales of five properties in the influencing market. The sales reflected unadjusted sales prices ranging from $27,143 to $50,615 per unit. After adjustment, the comparable sales illustrated a value range of $32,572 to $41,582 per unit, with mean and median adjusted sale prices of $35,894 and $33,646 per unit, respectively. CRA reported that none of the comparable sales required a significant degree of overall adjustment, and so equal emphasis was accorded to each in the final determination of value via sales comparison. CRA estimated a value of $35,000 per unit. Applied to the Regency Oaks Property’s 343 units, this resulted in CRA’s total value estimate for the Regency Oaks Property of approximately $12,000,000.

CRA also performed an EGIM analysis, which resulted in an indicated EGIM of approximately 4.4. CRA reported that that indicated EGIM was well within the range of 3.7 to 5.4 exhibited by the comparable transactions, and that indicator suggests that the value concluded for the property via comparative analysis was reasonable based on the Regency Oaks Property’s income-producing characteristics.

 

Reconciliation of Values and Conclusion of Appraisal.  For the appraisal of the Regency Oaks Property, CRA gave the greatest consideration to the income capitalization approach in the final conclusion of market value. CRA relied secondarily on the sales comparison approach, and reported that the value conclusion derived pursuant to the sales comparison approach is supportive of the conclusion derived pursuant to the income capitalization approach. The income capitalization approach using a direct capitalization analysis resulted in a value of $11,700,00, and the sales comparison approach resulted in a value of $12,000,000. CRA concluded that the market value of the Regency Oaks Property as of April 26, 2010 was $11,700,000.

 

Assumptions, Limitations and Qualifications of CRA’s Valuations.  In preparing each of the appraisals, CRA relied, without independent verification, on the information furnished by others. Each of CRA’s appraisal reports was subject to the following assumptions and limiting conditions: no responsibility was assumed for the legal description or for matters including legal or title considerations, and title to each property was assumed to be good and marketable unless otherwise stated; each property was appraised free and clear of any or all liens or encumbrances unless otherwise stated; responsible ownership and competent property management were assumed; all engineering was assumed to be correct; there were no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable, and no responsibility was assumed for such conditions or for arranging for engineering studies that may be required to discover them; there was full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance was stated, defined, and considered in the appraisal report; all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity had been stated, defined, and considered in the appraisal report; all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in each report was based; the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in either report; the distribution, if any, of the total valuation in each report between land and improvements applies only under the respective stated program of utilization; unless otherwise stated in each report, the existence of hazardous substances, including without limitation, asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which may or may not be present on each property, or other environmental conditions, were not called to the attention of nor did the appraiser become aware of such during the appraiser’s inspection, and the appraiser had no knowledge of the existence of such materials on or in the property unless otherwise stated; the appraiser has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the Americans with Disabilities Act; and former personal property items such as kitchen and bathroom appliances were, at the time of each appraisal report, either permanently affixed to the real estate or were implicitly part of the real estate in that tenants expect the use of such items in exchange for rent and never gain any of the rights of ownership, and the intention of the owners is not to remove the articles which are required under the implied or express warranty of habitability.

 

Compensation of Appraiser.  CRA’s fee for the appraisals was approximately $31,710. Aimco OP paid for the costs of the appraisals. CRA’s fee for the appraisals was not contingent on the approval or completion of the merger. In addition to the appraisals performed in connection with the merger, during the prior two years, CRA has been paid approximately $82,083 for appraisal services by Aimco OP and its affiliates. Except as set forth above, during the prior two years, no material relationship has existed between CRA and CCIP or Aimco OP or any of their affiliates. Aimco OP believes that its relationship with CRA had no negative impact on its independence in conducting the appraisals.

 

Availability of Appraisal Reports.  You may obtain a full copy of CRA’s appraisals upon request, without charge, by contacting Eagle Rock Proxy Advisors, LLC, by mail at 10 Commerce Drive, Cranford, New Jersey 07016; by fax at (908) 497-2314; or by telephone at (800) 217-9608. In addition, the appraisal reports have been filed with the SEC. For more information about how to obtain a copy of the appraisal reports see “Where You Can Find Additional Information.”

 

Conflicts of Interest.  ConCap is the general partner of CCIP and is wholly-owned by AIMCO/IPT, Inc., which in turn is wholly-owned by Aimco. Therefore, ConCap has a conflict of interest with respect to the merger. ConCap has fiduciary duties to AIMCO/IPT, Inc., ConCap’s sole stockholder and an affiliate of Aimco, on the one hand, and to CCIP and its limited partners, on the other hand. The duties of ConCap to CCIP and its limited partners conflict with the duties of ConCap to AIMCO/IPT, Inc., which could result in ConCap approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. As the general partner of CCIP, ConCap seeks the best possible terms for CCIP’s limited partners. This conflicts with Aimco’s interest in obtaining the best possible terms for Aimco OP.

 

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

 

The terms of the merger have not been determined in arm’s-length negotiations.  The terms of the merger, including the merger consideration, were determined through discussions between officers and directors of ConCap, on one hand, and officers of Aimco, on the other. All of the officers and directors of ConCap are also officers of Aimco. There are no independent directors of ConCap. If the terms of the merger had been determined through arm’s-length negotiations, the terms might be more favorable to CCIP and its limited partners.

 

The merger agreement does not require approval of the merger by a majority of the unaffiliated limited partners.  Under the provisions of the CCIP partnership agreement and applicable Delaware law, the merger must be approved by a majority in interest of the limited partnership units. As of October 20, 2010, Aimco OP and its affiliates owned approximately 76.7% of the outstanding CCIP Series A Units, enabling them to approve the merger without the consent or approval of any unaffiliated limited partners.

 

Alternative valuations of CCIP’s properties might exceed the appraised values relied on to determine the merger consideration.  Aimco determined the merger consideration in reliance on the appraised values of CCIP’s three properties. See, “Special Factors — The Appraisals,” beginning on page 8, for more information about the appraisals. Although an independent appraiser was engaged to perform complete appraisals of the properties, valuation is not an exact science. There are a number of other methods available to value real estate, each of which may result in different valuations of a property. Also, others using the same valuation methodology could make different assumptions and judgments, and obtain different results.

 

Actual sales prices of CCIP’s properties could exceed the appraised values that Aimco relied on to determine the merger consideration.  No recent attempt has been made to market the Sterling Property or the Plantation Gardens Property to unaffiliated third parties. There can be no assurance that the Sterling Property and the Plantation Gardens Property could not be sold for values higher than the appraised values used to determine the merger consideration if they were marketed to third-party buyers interested in properties of this type. ConCap recently evaluated a sale of the Regency Oaks Property to a third party, but determined that a third-party buyer would be unwilling to buy the property at a price that would be sufficient to repay both the outstanding balance of the loan secured by that property and the penalty associated with prepayment of the loan. Also, ConCap determined that an assumption of the existing loan would require a partial loan paydown due to lender loan to value requirements. Such a paydown would trigger a prepayment penalty that would result in no net proceeds to CCIP from the sale. These conclusions were consistent with ConCap’s previous efforts to sell the Regency Oaks Property in January 2009. Based on such unsuccessful sale attempts and conversations with brokers, ConCap determined that the Regency Oaks Property would likely be difficult to sell in the future given its value, debt balance and the prepayment penalty associated with such a sale.

 

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

 

No opinion has been obtained from an independent financial advisor that the merger is fair to unaffiliated limited partners.  While ConCap and each of the other Aimco Entities believes that the terms of the merger are fair to CCIP limited partners unaffiliated with ConCap or Aimco for the reasons discussed in “Special Factors — Fairness of the Transaction,” beginning on page 7. No opinion has been obtained as to whether the merger is fair to the limited partners of CCIP unaffiliated with ConCap or Aimco from a financial point of view.

 

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

 

Limited partners in certain jurisdictions will not be able to elect OP Units.  In those states where the offering of the OP Units hereby is not permitted, residents of those states will receive only the cash consideration in the merger.

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

The limited partners may recognize gain on the transaction.  If a CCIP limited partner receives or is deemed to receive cash or consideration other than OP Units in connection with the merger, the receipt of such cash or other consideration would be taxable to the limited partner either as “boot” or under the “disguised sale” rules. Subject to certain exceptions, including exceptions applicable to periodic distributions of operating cash flow, any transfer or deemed transfer of cash by Aimco OP to the limited partner (or its owners) within two years before or after such a contribution, including cash paid at closing, will generally be treated as part of a disguised sale. The application of the disguised sale rules is complex and depends, in part, upon the facts and circumstances applicable to the limited partner (and its owners), which Aimco has not undertaken to review. Accordingly, limited partners and their owners

are particularly urged to consult with their tax advisors concerning the extent to which the disguised sale rules would apply.

 

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

 

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

 

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

 

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

 

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

 

 

 

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

 

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

 

 

 

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

 

You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements and notes to the consolidated financial statements for the fiscal year ended December 31, 2009 included in CCIP’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 filed with the SEC on August 13, 2010, which are attached to this information statement/prospectus. See “Where You Can Find Additional Information” in this information statement/prospectus.

 

 

 

 

 

 

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

 

The OP Units are not listed on any securities exchange nor do they trade in an active secondary market. However, after a one-year holding period, OP Units are redeemable for shares of Aimco common stock (on a one-for-one basis) or cash equal to the value of such shares, as Aimco elects. As a result, the trading price of Aimco common stock is considered a reasonable estimate of the fair market value of an OP Unit. The number of OP Units offered in the merger with respect to each Series A Unit was calculated by dividing the per unit cash merger consideration by the average closing price of Aimco common stock, as reported on the NYSE over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the merger. The closing price of Aimco common stock as reported on the NYSE on September 10, 2010, the last trading day before the merger agreement was entered into, was $22.12.

 

The Series A Units are not listed on any securities exchange nor do they trade in an active secondary market. The per unit cash merger consideration payable to each holder of Series A Units is greater than ConCap’s estimate of the proceeds that would be available for distribution to limited partners of CCIP if its properties were sold at prices equal to their respective appraised values.

 

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

 

 

 

 

 

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

 

As of June 30, 2010, Aimco:

 

 

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

 

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

 

Through its wholly owned subsidiary, AIMCO/IPT, Inc., a Delaware corporation, Aimco owns all of the outstanding common stock of ConCap, the general partner of CCIP.

 

AIMCO/IPT, Inc. holds a 70% interest in AIMCO IPLP, L.P. as its general partner. AIMCO/IPT, Inc. and AIMCO IPLP, L.P. share voting and dispositive power over 50,572.4 Series A Units, or approximately 25.41% of the outstanding Series A Units. AIMCO IPLP, L.P. also owns 100% of each of Cooper River Properties, L.L.C. and Reedy River Properties, L.L.C., which own 11,365.6 and 28,832.5 Series A Units, respectively, or approximately 5.71% and 14.49% of CCIP’s outstanding Series A units, respectively.

 

AIMCO CCIP Merger Sub LLC, or the Aimco Subsidiary, is a Delaware limited liability company formed on June 10, 2010, for the purpose of consummating the merger with CCIP. The Aimco Subsidiary is a direct wholly-owned subsidiary of Aimco OP. The Aimco Subsidiary has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.

 

The names, positions and business addresses of the directors and executive officers of Aimco, Aimco OP, AIMCO-GP, Inc., AIMCO/IPT, AIMCO IPLP, L.P., Cooper River Properties, L.L.C., Reedy River Properties,

L.L.C. and the Aimco Subsidiary, as well as a biographical summary of the experience of such persons for the past five years or more, are set forth on Annex C attached hereto and are incorporated in this information statement/prospectus by reference. During the last five years, none of Aimco, Aimco-GP, AIMCO/IPT, AIMCO IPLP, L.P., Cooper River Properties, L.L.C., Reedy River Properties, L.L.C., Aimco OP, CCIP or ConCap nor, to the best of their knowledge, any of the persons listed in Annex C of this information statement/prospectus (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining further violations of or prohibiting activities subject to federal or state securities laws or finding any violation with respect to such laws. Additional information about Aimco and Aimco OP is included in documents incorporated by reference into this information statement/prospectus. See “Where You Can Find Additional Information.”

 

The following chart represents the organizational structure of the Aimco Entities:

 

 

CCIP is a Delaware limited partnership organized on March 19, 2008, in connection with a redomestication of a predecessor limited partnership from California in April 2008. The predecessor was organized as a California limited partnership on April 28, 1981. On July 23, 1981, CCIP registered with the Securities and Exchange Commission, or the SEC, under the Securities Act (File No. 2-72384) and commenced a public offering for the sale of $200,000,000 of limited partnership units. The sale of units terminated on July 21, 1983, with 200,342 units sold for $1,000 each, or gross proceeds of $200,342,000 to CCIP. In accordance with its partnership agreement, CCIP has repurchased and retired a total of 1,300.8 units for a total purchase price of $1,000,000. CCIP may repurchase any units, at its absolute discretion, but is under no obligation to do so. Since its initial offering, CCIP has not received, nor are limited partners required to make, additional capital contributions. CCIP’s partnership agreement provides that the partnership is to terminate on December 31, 2011 unless terminated prior to such date. ConCap, which is the general partner of CCIP, is a wholly owned subsidiary of AIMCO/IPT, which in turn is a wholly owned subsidiary of Aimco.

 

CCIP’s primary business and only industry segment is real estate related operations. At June 30, 2010, CCIP owned the following properties:

 

 

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

 

 

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

 

 

The real estate industry is highly competitive. All of the properties are subject to competition from other residential apartment complexes and, in the case of the Sterling Property, to commercial properties in the area. ConCap believes that all of the properties are adequately insured. Each apartment complex leases properties for terms of one year or less. No residential tenant leases 10% or more of the available rental space. Two commercial tenants, The Deveraux Foundation and Central Parking Systems, lease 13.6% and 19.5%, respectively, of available rental space. No other commercial tenant leases 10% or more of the available space.

 

CCIP regularly evaluates the capital improvement needs of the properties, and anticipates making certain routine capital expenditures with respect to each property during the remainder of 2010. With the exception of a $1,400,000 roof replacement at the Regency Oaks Property, the Sterling Property and the Regency Oaks Property

are in average physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. The Plantation Gardens Property requires substantial capital expenditures, as described below.

 

With respect to the Sterling Property, CCIP plans to install a co-generation plant at the property in order to generate a portion of the property’s electricity using natural gas and to allow the property to use waste heat to heat domestic water and heating water. The total cost of the installation is expected to be approximately $1,000,000. CCIP expects to fund approximately half of the total costs of the installation of the co-generation plant at the Sterling Property with a grant from the Pennsylvania Department of Environmental Protection, Office of Energy and Technology Department. In addition, ConCap is currently analyzing whether the Sterling Property may be certified as a historic structure and eligible to receive a tax credit under the Federal Historic Preservation Tax Incentives program in the event it is further redeveloped. The Federal Historic Preservation Tax Incentives program is jointly administered by the National Parks Service and the IRS in partnership with the State Historic Preservation Officer in each state. Under the program, a significant tax credit is available for certified rehabilitations of certified historic structures. If it is determined that the Sterling Property qualifies as a historic structure, CCIP may undertake an approximately $21,000,000 redevelopment of the property. There is no assurance that the Sterling Property will qualify for the historic tax credit or that any qualifying redevelopments will be undertaken in the future.

 

With respect to the Plantation Gardens Property, immediate capital needs total approximately $7,800,000. The work is required in order to bring the property into compliance with all city codes, lender mandates, and health and safety standards. Among other things, CCIP anticipates undertaking repairs to the balconies and catwalks at the property and repairs and improvements to the roadways and parking areas throughout the property. It also anticipates repainting all of the buildings, replacing and repairing certain fixtures in the building, and making aesthetic improvements to the property’s residential units and surrounding areas.

 

The following table sets forth certain information relating to the mortgages encumbering the CCIP’s properties at June 30, 2010.

 

 

 

 

CCIP presently has only Series A Units issued and outstanding. The Series A Units are entitled to allocations of profit and loss, and distributions, relating to CCIP’s interest in all of its three remaining properties. Prior to December 31, 2009, CCIP also had Series B Units and Series C Units issued and outstanding. The Series B Units were entitled to allocations of profit and loss, and distributions, relating only to CCIP’s interest in The Knolls Apartment. The Knolls Apartments were sold on September 21, 2009, and a distribution of $5,321,000 was paid to the holders of the Series B Units, which were terminated, effective December 31, 2009. The Series C Units were entitled to allocations of profit and loss, and distributions, relating only to CCIP’s interest in The Dunes Apartments. The Dunes Apartments were sold on August 17, 2009, and a distribution of $1,391,000 was paid to holders of the Series C Units, which were terminated, effective December 31, 2009. As of October 20, 2010, there were 199,030.2

Series A Units outstanding, and Aimco OP and its affiliates owned 152,648.05 of those units, or approximately 76.7% of those units.

 

CCIP distributed the following amounts during the years ended December 31, 2009 and 2008:

 

 

 

 

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

 

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

 

The CCIP partnership agreement also provides that ConCap and its affiliates receive 5% of gross receipts from all of CCIP’s properties as compensation for providing property management services. CCIP was charged by affiliates approximately $1,096,000 and $1,331,000 for the years ended December 31, 2009 and 2008, respectively, and approximately $476,000 and $582,000 for the six months ended June 30, 2010 and 2009, respectively.

 

Affiliates of ConCap charged CCIP for reimbursement of accountable administrative expenses amounting to approximately $718,000 and $866,000 for the years ended December 31, 2009 and 2008, respectively. A portion of these reimbursements for the years ended December 31, 2009 and 2008 are for construction management services provided by an affiliate of ConCap of approximately $305,000 and $350,000, respectively.

 

Affiliates of ConCap charged CCIP for reimbursement of accountable administrative expenses amounting to approximately $162,000 and $442,000 for the six months ended June 30, 2010 and 2009, respectively. A portion of these reimbursements for the six months ended June 30, 2010 and 2009 are construction management services provided by an affiliate of ConCap of approximately $57,000 and $223,000, respectively.

 

In accordance with the CCIP partnership agreement, during the year ended December 31, 2009, Aimco OP, an affiliate of ConCap, advanced CCIP approximately $2,611,000 to fund operations at The Sterling Property, The Knolls Apartments, Regency Oaks Apartments and the Plantation Gardens Property and capital expenditures at The Dunes Apartments. During the year ended December 31, 2008, Aimco OP advanced CCIP approximately $500,000 to fund operations at The Knolls Apartments, the Plantation Gardens Property and The Dunes Apartments. Interest

rates on the advances ranged from 3.25% to 5.25%, and interest expense was approximately $29,000 and $2,000 for the years ended December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, CCIP made payments on the outstanding loans and accrued interest of approximately $2,637,000 and $376,000, respectively, with proceeds from the sales of The Dunes Apartments and The Knolls Apartments in 2009, and with cash from operations.

 

During the six months ended June 30, 2010, Aimco OP advanced CCIP approximately $2,478,000 to fund real estate taxes at The Sterling Property and capital improvements and operations at CCIP’s investment properties. During the six months ended June 30, 2009, Aimco OP advanced CCIP approximately $2,383,000 to fund operations at The Sterling Property, The Knolls Apartments, the Regency Oaks Property and the Plantation Gardens Property and capital expenditures at The Dunes Apartments. The interest rate on the outstanding advances at June 30, 2010 was 3.25%, and interest expense was approximately $23,000 and $22,000 for the six months ended June 30, 2010 and 2009, respectively. During the six months ended June 30, 2009, CCIP made payments on the outstanding loans and accrued interest of approximately $1,049,000 from operations. There were no such payments made during the six months ended June 30, 2010. At June 30, 2010, the amount of the outstanding advances and accrued interest was approximately $2,630,000. Subsequent to June 30, 2010, CCIP received additional advances of approximately $570,000 to fund operations at CCIP’s investment properties and capital improvements at The Sterling Property. CCIP may receive additional advances of funds from Aimco OP although Aimco OP is not obligated to provide such advances. For more information on Aimco OP, see “Where You Can Find Additional Information,” beginning on page 98 of this information statement/prospectus.

 

CCIP insures its properties up to certain limits through coverage provided by Aimco, which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. CCIP insures its properties above the Aimco limits through insurance policies obtained by Aimco from insurers unaffiliated with ConCap or Aimco. During the years ended December 31, 2009 and 2008, CCIP was charged by Aimco and its affiliates approximately $429,000 and $577,000, respectively, for insurance coverage and fees associated with policy claims administration. During the six months ended June 30, 2010, CCIP was charged by Aimco and its affiliates approximately $405,000 for insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by CCIP during 2010 as other insurance policies renew later in the year.

 

In addition to its indirect ownership of the general partner interests in CCIP, Aimco and its affiliates owned 152,648.05 of the Series A Units of CCIP, or approximately 76.7% of the number of Series A Units outstanding, at October 20, 2010. Pursuant to the CCIP partnership agreement, limited partners holding a majority of the units are entitled to take action with respect to a variety of matters that would include, but are not limited to, voting on certain amendments to the CCIP partnership agreement and voting to remove ConCap as the general partner. As a result of its ownership of 76.7% of the outstanding units of limited partnership interests, Aimco and its affiliates are in a position to control all such voting decisions with respect to CCIP. Although ConCap owes fiduciary duties to CCIP’s limited partners, it also owes fiduciary duties to its sole stockholder, which is an affiliate of Aimco. As a result, the duties of ConCap, as general partner, to CCIP and its limited partners may come into conflict with the duties of ConCap to AIMCO/IPT, Inc. as its sole stockholder.

 

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

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

 

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

 

ConCap is the general partner of CCIP and owns all of the outstanding general partner interests in CCIP, which constitute 1% of the total interests in the partnership. CCIP has no directors or executive officers of its own. ConCap is a Delaware corporation, which is indirectly wholly owned by Aimco. None of the general partner or any of its directors or executive officers owns any of the limited partnership interests of the partnership. The following tables sets forth certain information as of October 20, 2010 with respect to the ownership by any person (including any “group,” as that term is used in Section 13(d)(3) of the Exchange Act) known to us to be the beneficial owner of more than 5% of the units of limited partnership interest of the partnership.

 

 

 

 

 

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

 

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

 

After taking into account the foregoing considerations, in 2008, ConCap determined to sell most of the properties then held by CCIP, including The Loft Apartments, The Knolls Apartments, Palm Lake Apartments, and The Dunes Apartments. The Loft Apartments and Palm Lake Apartments were sold to third party purchasers in 2008 for $9,325,000 and $7,000,000, respectively. In August and September 2009, CCIP sold The Dunes Apartments and The Knolls Apartments to third party purchasers for $6,300,000 and $13,350,000, respectively. In addition, ConCap has attempted to sell the Regency Oaks Property to third parties in the past but has been unable to find a third party willing to buy the property at a price that would provide net proceeds sufficient to repay the loan secured by that property (taking into account the prepayment penalty associated with the loan). ConCap determined that third parties would be unwilling to assume the existing loan because of lender loan to value requirements that would require the third party to pay down a portion of the loan.

 

In the Fall of 2009, ConCap began to consider strategic alternatives for CCIP and its remaining three properties. The CCIP partnership agreement provides that the term of the partnership must end no later than December 31, 2011, and does not allow for amendment of the partnership agreement to extend its term beyond that date. As a result, CCIP would not be able to retain its properties, and ConCap’s primary concern was the timing and manner of disposition of CCIP’s remaining properties.

 

In November 2009, Mr. Terry Considine, Chairman and Chief Executive Officer of Aimco, and Mr. Derek McCandless, Senior Vice President, Assistant General Counsel and Assistant Secretary of Aimco and ConCap, met to discuss the upcoming December 31, 2011 expiration of CCIP’s partnership term and the prohibition on extending the term under CCIP’s partnership agreement. Messrs. Considine and McCandless discussed the potential tax consequences to limited partners of liquidating the partnership and potential alternatives for addressing the impending term expiration. Messrs. Considine and McCandless also discussed Aimco OP’s potential interest in acquiring the Sterling Property, as well as Aimco OP’s fiduciary duties to unaffiliated limited partners if such a transaction were undertaken.

 

Mr. Considine and Mr. McCandless agreed to explore the possibility of Aimco OP acquiring one or more of CCIP’s properties through a transaction that would provide the unaffiliated limited partners with the opportunity to defer tax gain through an exchange of CCIP interests for Aimco OP units. Because Aimco OP’s initial interest related primarily to the Sterling Property, ConCap decided to obtain an appraisal to determine the value of the Sterling Property and to evaluate the proceeds and tax consequences to limited partners in such a transaction.

 

During November 2009, Mr. McCandless sought advice from outside legal and tax counsel to determine whether a transaction would be feasible that would result in Aimco OP’s ownership of one or more of CCIP’s properties while also providing potential tax deferral to the unaffiliated limited partners.

 

Also during November 2009, Mr. McCandless spoke with three different appraisers regarding the possibility of appraising the Sterling Property for purposes of a potential acquisition by Aimco OP. On December 4, 2009, ConCap engaged CRA to appraise the Sterling Property.

 

On January 15, 2010, CRA informed Mr. McCandless that it had valued the Sterling Property at $93.9 million. During the following two weeks, Mr. McCandless discussed CRA’s assumptions and valuation with Mr. John Bezzant, Senior Vice President — Transactions of Aimco and a Director and Senior Vice President of ConCap,

Mr. Ralph Pickett, Senior Vice President — Asset Management of Aimco and Senior Vice President of ConCap, and Mr. Nikhil Venkatesh, Vice President — Portfolio Strategy of Aimco and Vice President of ConCap. Mr. Bezzant reviewed the $93.9 million value in light of fiduciary duties owed to unaffiliated limited partners and Aimco OP’s investment criteria. Aimco OP’s investment criteria was to acquire the property at a price that did not significantly exceed Aimco OP’s estimate of the value of the property, which it calculated by adding the appraised value of the property to other assets and deducting therefrom the amount of all liabilities, including mortgage debt (taking into account any prepayment penalty associated with that debt). Mr. Bezzant determined that Aimco OP would be willing to pay the appraised value for the Sterling Property.

 

On February 4, 2010, while Aimco OP was preparing to move forward with a transaction involving the Sterling Property based on its appraised value, Mr. Bezzant discussed with Mr. McCandless the possibility of Aimco OP acquiring the Plantation Gardens Property from CCIP as well. Mr. Bezzant was interested in Aimco OP acquiring the Plantation Gardens Property because he thought that if significant capital expenditures were made at the property, its future operating income and value would increase, making it a good longer term investment for Aimco OP. Messrs. Bezzant and McCandless corresponded with Mr. Considine, and Mr. Considine agreed to move forward with obtaining an appraisal of the Plantation Gardens Property. On February 5, 2010, Mr. McCandless contacted CRA to begin work on an appraisal of the Plantation Gardens Property.

 

Concurrently with the discussions regarding Aimco’s potential acquisition of the Plantation Gardens Property, Mr. Bezzant and Mr. Mark Reoch, a director of asset management at Aimco, began to evaluate marketing the Regency Oaks Property for sale to a third party. During February 2010, Mr. Reoch spoke with several brokers with expertise in the Florida market, and was told that the Regency Oaks Property would be difficult to sell due to its market value compared to its outstanding debt and the prepayment penalty associated with that debt. As of July 31, 2010, the outstanding mortgage debt, including accrued interest, related to the Regency Oaks Property was $11,100,707, and the estimated prepayment penalty associated with that debt was $2,493,528. Messrs. Bezzant and Reoch determined that a third party would be unwilling to buy the property at a price that would provide net proceeds sufficient to repay the loan secured by the Regency Oaks Property (taking into account the prepayment penalty associated with the loan). Messrs. Bezzant and Reoch also concluded that an assumption of the existing loan would require a partial paydown of the loan because of lender loan to value requirements. Such a paydown would trigger a prepayment penalty that would result in no net proceeds to the partnership from a sale. These conclusions were consistent with ConCap’s previous efforts to sell the Regency Oaks Property in late 2008 through early 2009. For example, in October of 2008, with the assistance of a broker and real estate consultant, ConCap went out to market with a listing agreement and distributed email notices to over 10,500 owners and investors in connection with the Regency Oaks Property. In response, ConCap received only three preliminary indications of interest: one offering $11.6 million and assumption of debt, another a cash-only offer of $12.075 million, and the other a cash-only offer of $13.0 million. The outstanding mortgage debt associated with the Regency Oaks Property at that time was approximately $11.32 million, and the estimated prepayment penalty related to that debt was approximately $1.85 million. Accordingly, none of the indications of interest made sense on the terms proposed, as the mortgage lender indicated it would not accept the loan-to-value or debt coverage ratios without additional severe penalty payments. Accordingly, ConCap stopped marketing the property in March 2009. Consequently, in late March of 2010, Messrs. Bezzant and Reoch decided that a sale of the Regency Oaks Property was unlikely and decided not to pursue a sale at that time. Messrs. Bezzant and Reoch also concluded that it was unlikely that they would be able to sell the Regency Oaks Property to a third party at an acceptable price prior to the expiration of CCIP’s partnership term.

 

On April 26, 2010, CRA informed Mr. McCandless that it valued the Plantation Gardens Property at $24.7 million. On April 28, Mr. McCandless discussed CRA’s assumptions and valuation with Messrs. Bezzant and Venkatesh of Aimco. Mr. Bezzant reviewed the $24.7 million value in light of fiduciary duties owed to unaffiliated limited partners and Aimco OP’s investment criteria, which is described in more detail above. Messrs. Bezzant and McCandless considered that the Plantation Gardens Property’s appraised value was less than the amount owed on the loan secured by the property (taking into account the prepayment penalty related to that loan). As of July 31, 2010, the outstanding mortgage debt, including accrued interest, related to Plantation Gardens Property was $24,065,017, and the estimated prepayment penalty related to that debt was $5,294,979. Messrs. Bezzant and McCandless determined that, rather than subtracting all of the prepayment penalty from the

value of the property, Aimco OP would assign zero value to the Plantation Gardens Property in determining the consideration payable to CCIP limited partners.

 

In April 2010, following Mr. Bezzant’s determination that the Regency Oaks Property was unlikely to sell prior to the end of the CCIP partnership’s term, Ms. Danielle McClure, a director of finance at Aimco, and Ms. Joan Christ, a director of accounting at Aimco, analyzed whether the Regency Oaks Property could operate without the benefit of cash flows from the Sterling Property and the Plantation Gardens Property. The Regency Oaks Property currently operates with negative cash flow and has immediate capital expenditure needs of approximately $1,500,000. Based on the Regency Oaks Property’s utilization of approximately $445,000 of partnership funds in 2008, $174,000 of partnership funds in 2009, its continued utilization of partnership funds in 2010, and the property’s immediate capital needs, Ms. McClure and Ms. Christ concluded that the Regency Oaks Property could not operate without additional cash from outside sources. Mr. McCandless discussed the Regency Oaks Property situation with Messrs. Bezzant and Venkatesh on April 13, 2010, and the three concluded that Aimco OP should consider including the Regency Oaks Property in the transaction. On April 15, 2010, Mr. McCandless met with Mr. Considine, and Mr. Considine agreed to move forward with obtaining an appraisal of the Regency Oaks Property. Mr. McCandless contacted CRA about an appraisal of the Regency Oaks Property that same day.

 

On May 17, 2010, CRA informed Mr. McCandless that it valued the Regency Oaks Property at $11.7 million. During the following week, Mr. McCandless discussed CRA’s assumptions and valuation with Messrs. Bezzant and Venkatesh. Mr. Bezzant reviewed the $11.7 million value in light of fiduciary duties owed to unaffiliated limited partners and Aimco OP’s investment criteria, which is described in more detail above. Messrs. Bezzant and McCandless considered that the Regency Oaks Property’s appraised value was less than the outstanding amount owed on the loan secured by the property (taking into account the prepayment penalty related to that loan), and determined that, rather than subtracting all of the prepayment penalty from the value of the property, Aimco OP would assign zero value to the Regency Oaks Property in determining the consideration payable to CCIP limited partners.

 

In July 2010, Aimco became aware of immediate capital expenditure needs at the Plantation Gardens Property and informed the appraiser of those needs. On August 30, 2010, the appraiser informed Mr. McCandless that it had lowered its appraised value of the Plantation Gardens Property to $23.1 million after taking into account the additional capital needs.

 

On September 2, 2010, ConCap’s board of directors held a meeting to discuss the proposed merger. The board decided to approve and effect a transaction with Aimco OP that would give Aimco OP ownership of CCIP and, indirectly, all three of its properties. ConCap and the Aimco Entities considered a number of possible alternatives to the proposed merger with the Aimco Subsidiary, as described in greater detail below. However, ConCap and the Aimco Entities ultimately determined that the proposed merger with the Aimco Subsidiary is in the best interests of CCIP and its unaffiliated limited partners.

 

In the merger, each Series A Unit outstanding immediately prior to consummation of the merger will be converted into the right to receive, at the election of the holder of such Series A Unit, either $4.31 in cash or equivalent value in Aimco OP Units, except in those jurisdictions where the law prohibits the offer of OP Units in this transaction (or registration would be prohibitively costly). Because Aimco indirectly owns ConCap, which is the general partner of CCIP, the merger consideration has not been determined in an arm’s-length negotiation. In order to arrive at a fair consideration, CRA, an independent real estate appraisal firm, was engaged to perform complete appraisals of each of CCIP’s three properties. For more detailed information about the independent appraiser’s determination of the estimated values of the properties, see “The Merger — The Appraisals.” The per unit cash merger consideration payable to each holder of Series A Units is based on ConCap’s estimate of the proceeds that would be available for distribution to limited partners if the three properties were sold at prices equal to their respective appraised values. In order to calculate the proceeds available for distribution, first ConCap calculated the net proceeds available to all partners by (i) adding to the appraised values the value of any other non-real estate assets of CCIP that would not be included in the appraisal; and (ii) deducting all liabilities, including mortgage debt, prepayment penalties on the mortgage debt, debt owed to ConCap or its affiliates, accounts payable

and accrued expenses and certain other costs. The amount of liabilities deducted includes an estimate of $500,000 for expenses attributable to the properties that would be incurred prior to the merger but payable after the merger. It also includes an estimate of $16.8 million for prepayment penalties on CCIP’s mortgage debt, which was calculated assuming that all of CCIP’s mortgage debt is prepaid on July 31, 2010. For purposes of the U.S. Treasury rate that is a factor in determining the prepayment penalty, a three-month trailing average ending on July 31, 2010 was used. These prepayment penalties would be paid if the properties were sold to third parties and are therefore consistent with the methodology used to value the properties given CCIP’s mandatory termination on December 31, 2011. However, upon completion of the merger, Aimco does not intend to prepay this debt. For each of the Regency Oaks Property and the Plantation Gardens Property, the amount of liabilities deducted does not include that portion of the prepayment penalty associated with the property that, together with other liabilities (including mortgage debt) associated with the property, exceeded its appraised value. In other words, given the non-recourse nature of the debt, ConCap did not ascribe a negative overall value to the Regency Oaks Property or to the Plantation Gardens Property. Since the liabilities attributable to the properties (including mortgage debt and estimated prepayment penalties) exceed the appraised values of the properties and other partnership assets, ConCap determined that there would not be any remaining net proceeds available for distribution to the limited partners. Nevertheless, Aimco and ConCap determined that unaffiliated limited partners would receive an aggregate of $200,000 in the merger. This amount was deemed sufficient to make the merger consideration to unaffiliated limited partners a non-trivial amount and facilitate their ability to exchange their Series A Units for OP Units. However, it was not so large that it would make the transaction economically undesirable for Aimco OP. In order to determine the per unit cash merger consideration, ConCap divided this amount by the number of outstanding Series A Units held by limited partners unaffiliated with Aimco OP. This calculation, which is summarized below, resulted in per unit cash merger consideration of $4.31.

 

 

 

 

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

the fair market value of an OP Unit. As of October 25, 2010, the average closing price of Aimco common stock over the preceding ten consecutive trading days was $22.96, which would have resulted in OP Unit consideration of 0.19 OP Units per Series A Unit.

 

ConCap is the general partner of CCIP and is indirectly wholly-owned by Aimco. Therefore, ConCap has a conflict of interest with respect to the merger. ConCap has fiduciary duties to AIMCO/IPT, Inc., ConCap’s sole stockholder and an affiliate of Aimco, on the one hand, and to CCIP and its limited partners, on the other hand. The duties of ConCap to CCIP and its limited partners conflict with the duties of ConCap to AIMCO/IPT, Inc., which could result in ConCap approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. As the general partner of CCIP, ConCap seeks the best possible terms for CCIP’s limited partners. This conflicts with Aimco’s interest in obtaining the best possible terms for Aimco OP.

 

The parties to a going private transactions such as the proposed merger are often subject to claims alleging that the transaction is unfair to unaffiliated security holders. Litigation in these situations can arise even if the transaction is ultimately found to be fair to the unaffiliated security holders. In order to attempt to reduce the probability of any such claims, and the related costs of defending against any such claims, Aimco OP has decided to offer unaffiliated limited partners, in addition to the merger consideration, an additional payment of $2.16 per Series A Unit in exchange for executing a waiver and release of potential claims the limited partner may have against the Releasees (as defined below). The amount of $2.16 per unit was determined by dividing $100,000 by the number of outstanding Series A Units held by unaffiliated limited partners. This $100,000 amount represents Aimco OP’s estimate of the value of such a release in potentially reducing its costs to defend against such claims. Unaffiliated limited partners may elect to receive the additional consideration by completing the election form, executing the waiver and release that is attached to the election and returning the election form and the executed waiver and release in accordance with the instructions provided. In executing the waiver and release, the limited partner, on behalf of himself, his heirs, estate, executor, administrator, successors and assigns, will release Aimco OP and its predecessors, successors and assigns and its present and former parents, subsidiaries, affiliates, investors, insurers, reinsurers, officers, directors, employees, agents, administrators, auditors, attorneys, accountants, information and solicitation agents, investment bankers, and other representatives, including but not limited to Aimco and ConCap, the general partner of CCIP (collectively, the “Releasees”), from any and all claims and causes of action, whether brought individually, on behalf of a class, or derivatively, demands, rights, or liabilities, including, but not limited to, claims for negligence, gross negligence, fraud, breach of fiduciary duty (including, but not limited to, duties of care, loyalty or candor), mismanagement, corporate waste, misrepresentation, whether intentional or negligent, misstatements and omissions to disclose, breach of contract, violations of any state or federal statutes, rules or regulations, whether known claims or unknown claims, whether past claims, present claims or future claims through and including the date of the consummation of the merger, including, but not limited to, those claims that have arisen or arise, directly or indirectly, out of or relate, directly or indirectly, to (a) the merger agreement and the transactions contemplated thereby (excluding only such unaffiliated limited partner’s rights, if any, under the merger agreement), (b) any other circumstance, agreement, activity, action, omission, event or matter occurring or existing on or prior to the date of the consummation of the merger, (c) the ownership of any limited partnership interest in CCIP, including but not limited to, any and all claims related to the management of CCIP or the properties owned by CCIP (whether currently or previously), the payment of management fees or other monies to ConCap and to affiliates of CCIP and prior sales of properties, or (d) the purchase, acquisition, holding, sale or voting of one or more limited partnership interests in CCIP (collectively, the “Released Claims”).

 

The waiver and release do not apply to claims limited partners may have under the federal securities laws.

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

 

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

 

Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will waive any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, that is similar, comparable or equivalent to Section 1542. Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will acknowledge and agree that he may later discover facts in addition to or different from those which he or she now knows or believes to be true with respect to the subject matter of the released claims, but such unaffiliated limited partner will be deemed to have fully, finally and forever settled and released any and all released claims, known or unknown, suspected or unsuspected, contingent or non-contingent, that now exist or may arise in the future through and including the date of the consummation of the merger under any theory of law or equity now existing, including, but not limited to, conduct that is negligent, intentional, with malice, or a breach of any duty, law or rule, without regard to the subsequent discovery of the existence of such different or additional facts.

 

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

 

After the merger, Aimco OP will be the sole limited partner in CCIP, and will own all of the outstanding Series A Units. ConCap will continue to be the sole general partner of CCIP after the merger, and CCIP’s partnership agreement in effect immediately prior to the merger will remain unchanged after the merger. Aimco OP intends to retain the Series A Units after the merger. After the merger, Aimco will evaluate the capital improvement needs of the properties, and anticipates making certain routine capital expenditures with respect to each property during the remainder of 2010. In addition, as described in more detail above under the heading, “Information About CCIP,” Aimco expects that the Plantation Gardens Property will require substantial capital expenditures in order to fund repairs and other improvements at the property. Aimco is currently considering a possible sale of the Plantation Gardens Property to a third party purchaser following these capital expenditures. Aimco does not expect such a sale to be accretive. In addition, Aimco expects that the Regency Oaks Property will require an approximately $1,400,000 roof replacement. Also, Aimco expects that CCIP will install a co-generation plant at the Sterling Property after the merger, at a total cost of approximately $1,000,000, approximately half of which may be financed with a grant from the Pennsylvania Department of Environmental Protection, Office of Energy and Technology Department. Further, with respect to the Sterling Property, ConCap is currently analyzing whether the Sterling Property may be eligible to receive a tax credit under the Federal Historic Preservation Tax Incentives program in the event it is further redeveloped. If it is determined that the Sterling Property qualifies as a historic structure and is eligible to receive a tax credit, CCIP may undertake an approximately $21,000,000 redevelopment of the property. There is no assurance that the Sterling Property will qualify for the historic tax credit or that any qualifying redevelopments will be undertaken in the future.

 

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

 

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

 

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

 

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

 

The costs of planning and implementing the merger, including the cash merger consideration and the preparation of this information statement/prospectus, will be borne by Aimco OP without regard to whether the merger is effectuated. The estimated amount of these costs is approximately $881,210 (assuming all limited partners elect to receive the cash merger consideration and all limited partners unaffiliated with Aimco OP elect to receive an additional cash payment in exchange for executing a waiver and release). Aimco OP is paying for the costs of the merger with funds on hand or from drawings under its revolving credit facility. The revolving credit facility is pursuant to Aimco OP’s Amended and Restated Senior Secured Credit Agreement, as amended, with a syndicate of financial institutions, with Bank of America, N.A. as administrative agent, swing line lender and L/C issuer. Borrowings under the revolving credit facility bear interest based on a pricing grid determined by leverage (either at LIBOR plus 4.25% with a LIBOR floor of 2.00% or, at Aimco OP’s option, a base rate equal to the Prime rate plus a spread of 3.00%). The revolving credit facility matures May 1, 2013, and may be extended for an additional year, subject to certain conditions.

 

Under Delaware law, the merger must be approved by the CCIP general partner and a majority in interest of the Series A Units. The general partner has determined that the merger is advisable and in the best interests of CCIP and its limited partners and has approved the merger and the merger agreement. As of October 20, 2010, there were issued and outstanding 199,030.2 Series A Units, and Aimco OP and its affiliates owned 152,648.05 of those units, or approximately 76.7% of the number outstanding units. Aimco OP and its affiliates have indicated that they intend to take action by written consent, as permitted under the partnership agreement, to approve the merger on or about          , 2010.

 

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