Offer to Purchase for Cash
Up to 30,000 Units of Limited Partnership Interest
in
CENTURY PROPERTIES FUND XVIII,
a California limited partnership
for
$70 Net Per Unit
by
MADISON RIVER PROPERTIES, L.L.C.
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THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK TIME, ON JANUARY 15, 1998, UNLESS THE OFFER IS EXTENDED.
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IMPORTANT
Madison River Properties, L.L.C., a Delaware limited liability
company (the "Purchaser"), is offering to purchase up to 30,000 of the
outstanding units of limited partnership interest ("Units") in Century
Properties Fund XVIII, a California limited partnership (the "Partnership"),
at a purchase price of $70 per Unit (the "Purchase Price"), net to the seller
in cash, without interest, upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Assignment of Partnership
Interest (which, together with any supplements or amendments, collectively
constitute the "Offer"). The Purchase Price is subject to adjustment under
certain circumstances, as described herein. Holders of Units (each, a "Limited
Partner") who tender their Units in response to the Offer will not be
obligated to pay any commissions or partnership transfer fees. The Purchaser
is an affiliate of Fox Partners, which is the general partner of the
Partnership (the "General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of
and controlled by Insignia Properties Trust ("IPT"), which
is controlled by Insignia Financial Group, Inc.
("Insignia"). IPT, through its operating partnership
Insignia Properties, L.P. ("IPLP"), currently owns 21,655
Units.
o The net liquidation value per Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) is $120.83. The Purchaser
does not believe, however, that the Estimated Liquidation
Value represents a fair estimate of the market value of a
Unit, primarily due to the fact that such estimate does not
take into account timing considerations, market
uncertainties and legal and other expenses that would be
incurred in connection with a liquidation of the
Partnership. In addition, the Estimated Liquidation Value
does not take into account the fact that the Limited
Partners effectively have only a 90% interest in cash from
operations, as opposed to their 99% interest in liquidation
proceeds. See Section 13. Accordingly, the Purchaser does
not believe that the Estimated Liquidation Value should be
viewed as representative of the amount a Limited Partner can
realistically expect to obtain on a sale of a Unit in the
near term.
o The Purchaser will have the right to vote all Units acquired
pursuant to the Offer. If the Purchaser (which is an
affiliate of the General Partner) is successful in acquiring
more than 15,845 Units, IPT will own in excess of 50% of the
total Units outstanding and, accordingly, will be able to
control the outcome of almost all voting decisions with
respect to the Partnership, including decisions regarding
liquidation, amendments to the Limited Partnership
Agreement, removal and replacement of the General Partner
and mergers, consolidations and other extraordinary
transactions not involving a "roll-up." Even if the
Purchaser acquires a lesser number of Units pursuant to the
Offer, however, because IPT already owns (through IPLP)
approximately 28.9% of the outstanding Units it will be able
to significantly influence the outcome of all voting
decisions with respect to the Partnership (other than
decisions involving certain "roll-up" transactions prior to
January 1, 2000).
o Between October 1994 and June 1995, XxXxxxxx Ventures I,
L.P. ("XxXxxxxx"), which at the time was an affiliate of the
General Partner but was not an affiliate of Insignia, IPT or
the Purchaser, acquired 21,513 (or approximately 28.7%) of
the outstanding Units, at a purchase price of $21.50 per
Unit, pursuant to a series of tender offers. In a series of
transactions that occurred during the first half of 1996,
Insignia (through various affiliates) acquired a controlling
interest in the General Partner and all of the Units owned
by XxXxxxxx. Currently, IPT controls the General Partner and
IPLP owns all of the Units previously held by XxXxxxxx.
o The Purchaser (which is an affiliate of the General Partner)
is making the Offer with a view to making a profit.
Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the General Partner) to
purchase Units at a low price and the desire of the Limited
Partners to sell their Units at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Units should complete and sign
the Assignment of Partnership Interest in accordance with the Instructions to
the Assignment of Partnership Interest and mail or deliver the signed
Assignment of Partnership Interest to the Depositary. A Limited Partner may
tender any or all of the Units owned by that Limited Partner; provided,
however, that because of restrictions in the Partnership's Limited Partnership
Agreement, a partial tender of Units must be for a minimum of five Units
(other than Limited Partners who hold Units in an Individual Retirement
Account or Xxxxx Plan, who must tender a minimum of two Units). Tenders of
fractional Units will not be permitted, except by a Limited Partner who is
tendering all of the Units owned by that Limited Partner.
Questions and requests for assistance or for additional copies of
this Offer to Purchase and the Assignment of Partnership Interest may be
directed to the Information Agent at the address and telephone numbers set
forth below and on the back cover of this Offer to Purchase. No soliciting
dealer fees or other payments to brokers for tenders are being paid by the
Purchaser (which is an affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(000) 000-0000
December 17, 1997
TABLE OF CONTENTS
PAGE
----
INTRODUCTION.................................................................................................... 1
The Purchaser; Affiliation with the General Partner......................................................... 1
Some Factors to Be Considered by Limited Partners........................................................... 1
Reasons for and Effects of the Offer........................................................................ 3
Certain Tax Considerations.................................................................................. 3
Originally Anticipated Term of the Partnership; General Policy Regarding Sales
and Refinancings of Partnership Properties; Alternatives............................................... 4
Conditions.................................................................................................. 4
Distributions............................................................................................... 4
Outstanding Units........................................................................................... 4
THE OFFER....................................................................................................... 5
Section 1. Terms of the Offer; Expiration Date; Proration.................................................. 5
Section 2. Acceptance for Payment and Payment for Units.................................................... 6
Section 3. Procedure for Tendering Units................................................................... 6
Valid Tender............................................................................................ 6
Signature Requirements.................................................................................. 6
Delivery of Assignment of Partnership Interest.......................................................... 7
Appointment as Proxy; Power of Attorney................................................................. 7
Assignment of Interest in Future Distributions.......................................................... 7
Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation
to Give Notice of Defects.......................................................................... 8
Backup Federal Income Tax Withholding................................................................... 8
FIRPTA Withholding...................................................................................... 8
Binding Obligation...................................................................................... 8
Section 4. Withdrawal Rights............................................................................... 8
Section 5. Extension of Tender Period; Termination; Amendment.............................................. 9
Section 6. Certain Federal Income Tax Matters.............................................................. 9
General ............................................................................................. 9
Gain or Loss Generally.................................................................................. 10
Unrealized Receivables and Certain Inventory............................................................ 10
Passive Activity Loss Limitation........................................................................ 10
Partnership Termination................................................................................. 11
Backup Withholding and FIRPTA Withholding............................................................... 11
Section 7. Effects of the Offer............................................................................ 12
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act.......................... 12
Control of Limited Partner Voting Decisions by Purchaser;
Effect of Relationship with General Partner........................................................ 12
Section 8. Future Plans of Insignia, IPT and the Purchaser................................................. 13
Section 9. Certain Information Concerning the Partnership.................................................. 13
General ............................................................................................. 14
Originally Anticipated Term of Partnership; Alternatives................................................ 14
General Policy Regarding Sales and Refinancings of Partnership Properties............................... 14
Selected Financial and Property-Related Data............................................................ 14
Cash Distributions History.............................................................................. 16
Operating Budgets of the Partnership.................................................................... 16
Section 10. Conflicts of Interest and Transactions with Affiliates......................................... 17
Conflicts of Interest with Respect to the Offer......................................................... 17
Voting by the Purchaser................................................................................. 17
i
PAGE
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Financing Arrangements.................................................................................. 18
Transactions with Affiliates............................................................................ 18
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia........................... 18
The Purchaser........................................................................................... 18
IPT and IPLP............................................................................................ 19
Insignia ............................................................................................. 20
Section 12. Source of Funds................................................................................ 22
Section 13. Background of the Offer........................................................................ 22
Affiliation with the General Partner and NPI-AP......................................................... 22
Previous Tender Offers.................................................................................. 22
Determination of Purchase Price......................................................................... 22
Section 14. Conditions of the Offer........................................................................ 26
Section 15. Certain Legal Matters.......................................................................... 27
General ............................................................................................. 27
Antitrust ............................................................................................. 28
Margin Requirements..................................................................................... 28
Section 16. Fees and Expenses.............................................................................. 28
Section 17. Miscellaneous.................................................................................. 28
SCHEDULE I - Transactions in the Units Effected by IPLP in the Past 60 Days...........................S-1
SCHEDULE II - Information Regarding the Managers of the Purchaser......................................S-2
SCHEDULE III - Information Regarding the Trustees and Executive Officers of IPT.........................S-3
SCHEDULE IV - Information Regarding the Directors and Executive Officers of Insignia...................S-5
SCHEDULE V - IPT Partnerships.........................................................................S-8
ii
TO THE LIMITED PARTNERS OF
CENTURY PROPERTIES FUND XVIII
INTRODUCTION
Madison River Properties, L.L.C. (the "Purchaser"), which is a
Delaware limited liability company and an affiliate of the General Partner (as
defined below), hereby offers to purchase up to 30,000 of the outstanding
units of limited partnership interest ("Units"), representing approximately
40% of the Units outstanding in Century Properties Fund XVIII, a California
limited partnership (the "Partnership"), at a purchase price of $70 per Unit
(the "Purchase Price"), net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Assignment of Partnership Interest (which, together with any
supplements or amendments, collectively constitute the "Offer"). Tenders of
fractional Units will not be permitted, except by a Limited Partner who is
tendering all of the Units owned by that Limited Partner. The Offer is not
conditioned on any aggregate minimum number of Units being tendered. A Limited
Partner may tender any or all of the Units owned by that Limited Partner;
provided, however, that because of restrictions in the Partnership's Limited
Partnership Agreement (the "Limited Partnership Agreement"), a partial tender
of Units must be for a minimum of five Units (other than Limited Partners who
hold Units in an Individual Retirement Account ("IRA") or Xxxxx Plan, who must
tender a minimum of two Units). Accordingly, any Limited Partner that owns
five or fewer Units (or, for Limited Partners who hold Units in an IRA or
Xxxxx Plan, two or fewer Units) must tender all or none of its Units. The
Purchaser (which is an affiliate of the General Partner) will pay all charges
and expenses of Beacon Hill Partners, Inc., who will serve as the Purchaser's
information agent for the Offer (the "Information Agent"), and Xxxxxx Trust
Company of New York, who will act as depositary for the Offer (the
"Depositary").
The Purchaser; Affiliation with the General Partner. Fox Partners, a
California general partnership, is the general partner of the Partnership (the
"General Partner") and is controlled by Insignia Properties Trust, a Maryland
real estate investment trust ("IPT"). The Purchaser is a newly formed,
wholly-owned subsidiary of Insignia Properties, L.P., a Delaware limited
partnership ("IPLP"), which is the operating partnership of IPT. IPT is the
sole general partner of IPLP (owning approximately 66% of the total equity
interests in IPLP), and Insignia Financial Group, Inc., a Delaware corporation
("Insignia"), is the sole limited partner of IPLP (owning approximately 34% of
the total equity interests in IPLP). Insignia and its affiliates also own
approximately 67% of the outstanding common shares of IPT. NPI-AP Management,
L.P. ("NPI-AP"), which since January 1996 has been an affiliate of Insignia
and is an affiliate of IPT and the Purchaser, provides property management
services to the Partnership, and since January 1996 Insignia (directly or
through affiliates) has performed asset management, partnership administration
and investor relations services for the Partnership. By reason of these
relationships, the General Partner has conflicts of interest in considering
the Offer. The General Partner has indicated in a Statement on Schedule 14D-9
(the "Schedule 14D-9") filed with the Securities and Exchange Commission (the
"Commission") that it is remaining neutral and making no recommendation as to
whether Limited Partners should tender their Units in response to the Offer.
LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED
MATERIALS AND THE SCHEDULE 14D-9 CAREFULLY AND IN THEIR ENTIRETY BEFORE
DECIDING WHETHER TO TENDER THEIR UNITS. See Sections 10 and 13.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser and the General Partner are affiliates of and
controlled by IPT, which is controlled by Insignia. The
General Partner has conflicts of interest in considering the
Offer, including (i) as a result of the fact that a sale or
liquidation of the Partnership's assets would result in a
decrease or elimination of the fees paid to the General
Partner and/or its affiliates and (ii) the fact that as a
consequence of the Purchaser's ownership of Units, the
Purchaser (which is an affiliate
of the General Partner) may have incentives to seek to
maximize the value of its ownership of Units, which in turn
may result in a conflict for the General Partner in
attempting to reconcile the interests of the Purchaser
(which is an affiliate of the General Partner) with the
interests of the other Limited Partners. See Section 10.
o The net liquidation value per Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) is $120.83. See Section 13
for a discussion of why the Purchaser (which is an affiliate
of the General Partner) believes that the Estimated
Liquidation Value is not necessarily indicative of the fair
market value of a Unit. THE PURCHASER (WHICH IS AN AFFILIATE
OF THE GENERAL PARTNER) MAKES NO REPRESENTATION AND
EXPRESSES NO OPINION AS TO THE FAIRNESS OR ADEQUACY OF THE
PURCHASE PRICE.
o As with any rational investment decision, the Purchaser
(which is an affiliate of the General Partner) is making the
Offer with a view to making a profit. Accordingly, there is
a conflict between the desire of the Purchaser (which is an
affiliate of the General Partner) to purchase Units at a low
price and the desire of the Limited Partners to sell their
Units at a high price.
o If the Purchaser is successful in acquiring more than 15,845
Units pursuant to the Offer, IPT (which is an affiliate of
the General Partner) will own in excess of 50% of the total
Units outstanding and, accordingly, will be able to control
the outcome of almost all voting decisions with respect to
the Partnership, including decisions concerning liquidation,
amendments to the Limited Partnership Agreement, removal and
replacement of the General Partner and mergers,
consolidations and other extraordinary transactions not
involving a "roll-up." Even if the Purchaser acquires a
lesser number of Units pursuant to the Offer, however,
because IPT already owns (through IPLP) approximately 28.9%
of the outstanding Units it will be able to significantly
influence the outcome of almost all voting decisions with
respect to the Partnership. This means that, other than with
respect to "roll-up" transactions, (i) non-tendering Limited
Partners could be prevented from taking action they desire
but that IPT (which is an affiliate of the General Partner)
opposes and (ii) IPT (which is an affiliate of the General
Partner) may be able to take action desired by IPT but
opposed by the non-tendering Limited Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available
to Limited Partners wishing to sell their Units, there is no
formal trading market for Units. Moreover, the Purchaser
understands that the operations of the Chicago Partnership
Board, one of the leading partnership interest "auction"
intermediaries, have been suspended by securities
regulators. Accordingly, THE OFFER AFFORDS LIMITED PARTNERS
AN OPPORTUNITY TO DISPOSE OF THEIR UNITS FOR CASH WHICH
OTHERWISE MIGHT NOT BE AVAILABLE TO THEM.
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. The Purchase Price is approximately
19% greater than the highest reported secondary market sales
price of any Unit during the past six months (based on
published information and information provided by the
General Partner). However, reported secondary market sales
prices do not take into account commissions and transfer
fees typically payable by a Limited Partner in connection
with a secondary market sale. Therefore, the actual proceeds
received by a Limited Partner who sells Units in the
secondary market are typically significantly less than the
reported sales prices.
o LIMITED PARTNERS WHO SELL UNITS PURSUANT TO THE OFFER WILL
NOT BE CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE
FROM 3% TO 10% OF THE SALES PRICE) OR PARTNERSHIP TRANSFER
FEES (WHICH ARE TYPICALLY $100 PER TRANSFER). The Purchaser
will pay all transfer fees imposed by the Partnership in
connection with sales of Units pursuant to the Offer.
2
o Real estate markets in the United States generally have
recovered and experienced an upward trend since the end of
the last recession. That recovery and upward trend might
continue. On the other hand, those markets also may be
adversely affected by a variety of factors, including
possible fluctuations in interest rates, economic slowdowns
and overbuilding. Accordingly, ownership of Units continues
to be a speculative investment. THE OFFER MAY PROVIDE
LIMITED PARTNERS WITH THE OPPORTUNITY TO LIQUIDATE THEIR
INTERESTS IN THE PARTNERSHIP AND REPLACE THEM WITH
INVESTMENTS THAT ARE LESS SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to
avoid in the future the expenses, delays and complications
in filing personal income tax returns which may be caused by
ownership of Units. In addition, A LIMITED PARTNER WHO SELLS
100% OF ITS UNITS PURSUANT TO THE OFFER WILL NO LONGER BE
SUBJECT TO THE PASSIVE ACTIVITY LOSS LIMITATION WITH RESPECT
TO "SUSPENDED" LOSSES ATTRIBUTABLE TO THOSE UNITS AND,
THEREFORE, WILL BE ABLE TO UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who
have become disenchanted with real estate investments
generally, and in particular with the perceived illiquidity
of investments made through limited partnerships, because it
may afford an immediate opportunity for those Limited
Partners to liquidate their investments in the Partnership.
On the other hand, Limited Partners who tender their Units
will be giving up the opportunity to participate in any
potential future benefits represented by the ownership of
those Units, including, for example, the right to
participate in any future distributions of cash or property,
whether from operations, the proceeds of a sale or
refinancing of one or more of the Partnership's properties
or in connection with any future liquidation of the
Partnership. Instead, any such distributions of cash or
property with respect to Units tendered in the Offer and
purchased by the Purchaser will be paid to the Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Units and has been advised by the General Partner that the General
Partner also expects to make no recommendation. Each Limited Partner must make
its own decision, based on the Limited Partner's particular circumstances, as
to whether to tender Units and, if so, how many Units to tender. Limited
Partners should consult with their respective advisors regarding the
financial, tax, legal and other implications of accepting the Offer. LIMITED
PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. If the
Purchaser (which is an affiliate of the General Partner) is successful in
acquiring more than 15,845 Units pursuant to the Offer, IPT will own in excess
of 50% of the total Units outstanding and, accordingly, will be able to
control the outcome of all votes by Limited Partners, other than voting
decisions concerning certain "roll-up" transactions prior to January 1, 2000,
which require the approval of Limited Partners holding at least a majority of
the outstanding Units not held by persons affiliated with the General Partner.
Even if the Purchaser acquires a lesser number of Units pursuant to the Offer,
however, because IPT already owns (through IPLP) approximately 28.9% of the
outstanding Units it will be able to significantly influence the outcome of
all voting decisions with respect to the Partnership not involving a "roll-up"
transaction. See Sections 8, 10 and 13.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Units sold over such
Limited Partner's adjusted tax basis in those Units which may be taxable as
ordinary income or loss, capital gain or loss or gain from real estate
depreciation recapture. Limited Partners that have suspended "passive losses"
from the Partnership or other passive activity investments generally may
deduct these losses up to the amount of any gain from the sale. A sale
pursuant to the Offer of all of a Limited Partner's Units will terminate his
or her investment in the Partnership and, commencing with the year following
the year of sale, the Limited Partner will no longer
3
receive Partnership tax information or have to report the complicated tax
information currently required of Limited Partners. See Section 6.
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives.
According to the Partnership's Prospectus dated November 5, 1982, the General
Partner anticipated that the Partnership would sell its properties five to
eight years after their acquisition, depending upon the then current real
estate and money markets, economic climate and income tax consequences to the
Limited Partners. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market
conditions. The General Partner monitors each property's specific locale and
sub-market conditions evaluating current trends, competition, new construction
and economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement requirements.
In addition, the financing structure for each property, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision of the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. The Purchaser (which is an affiliate of the General
Partner) has been advised by the General Partner that the Partnership recently
received an unsolicited offer by an unaffiliated third party to purchase
Overlook Apartments in Salt Lake City, Utah for $16,250,000. Based on the
above considerations, however, the General Partner has determined that it is
not in the best interest of Limited Partners to sell or refinance that or any
other Partnership property at the present time. Under the Limited Partnership
Agreement the term of the Partnership will continue until December 31, 2007,
unless sooner terminated as provided in the Limited Partnership Agreement or
by law. Limited Partners could, as an alternative to tendering their Units,
take a variety of possible actions, including voting to liquidate the
Partnership or causing the Partnership to merge with another entity or engage
in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however.
See Section 14.
Distributions. The Partnership made a cash distribution to the
Limited Partners of $8.58 per Unit in 1997 (through December 17). Prior to the
1997 distribution, the last distribution made by the Partnership to Limited
Partners was in 1986 ($5.00 per Unit). In total, original investors in the
Partnership have received distributions of only $66.88 in respect of their
original $1,000 investment made in 1983. See Section 9. However, the
Partnership is currently generating positive cash flow from operations, and
the Purchaser (which is an affiliate of the General Partner) believes that the
Partnership will continue to generate positive cash flow from operations,
depending upon the real estate, capital markets and general economic
conditions at the time. The potential for future distributions was considered
by the Purchaser (which is an affiliate of the General Partner) when
establishing the Purchase Price. Limited Partners who tender their Units in
response to the Offer will retain any distributions made through December 17,
1997 and will be entitled to receive and retain any subsequent distributions
made by the Partnership prior to the date on which the Purchaser pays for
tendered Units pursuant to the Offer, although any such subsequent
distribution will result in a reduction of the Purchase Price. See Section 1.
However, tendering Limited Partners will not be entitled to receive or retain
any distributions in respect of tendered Units which are made on or after the
date on which the Purchaser pays for such Units pursuant to the Offer,
regardless of the fact that the record date (as opposed to the payment date)
for any such distribution may be a date prior to the date of purchase.
See Section 3.
Outstanding Units. According to information supplied by the
Partnership, as of December 1, 1997 there were 75,000 Units issued and
outstanding, which were held of record by 5,356 Limited Partners. IPLP
currently owns 21,655 Units. See Schedule I to this Offer to Purchase for a
list of transactions in the Units effected by IPLP within the past 60 days.
4
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 30,000 Units that are validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with the procedures set forth
in Section 4. For purposes of the Offer, the term "Expiration Date" shall mean
12:00 midnight, New York City time, on January 15, 1998, unless the Purchaser
(which is an affiliate of the General Partner) in its sole discretion shall
have extended the period of time for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date on which the
Offer, as extended by the Purchaser, shall expire. See Section 5 for a
description of the Purchaser's right to extend the period of time during which
the Offer is open and to amend or terminate the Offer.
THE PURCHASE PRICE WILL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER UNIT, IF ANY, MADE BY THE PARTNERSHIP TO LIMITED
PARTNERS ON OR AFTER DECEMBER 17, 1997 AND PRIOR TO THE DATE ON WHICH THE
PURCHASER PAYS FOR UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) increases the consideration offered to
Limited Partners pursuant to the Offer, the increased consideration will be
paid for all Units accepted for payment pursuant to the Offer, regardless of
whether the Units were tendered prior to the increase in the consideration
offered.
If more than 30,000 Units are validly tendered prior to the
Expiration Date and not properly withdrawn prior to the Expiration Date in
accordance with the procedures specified in Section 4, the Purchaser (which is
an affiliate of the General Partner) will, upon the terms and subject to the
conditions of the Offer, accept for payment and pay for an aggregate of 30,000
of the Units so tendered, pro rata according to the number of Units validly
tendered by each Limited Partner and not properly withdrawn on or prior to the
Expiration Date, with appropriate adjustments to avoid (i) purchases of
fractional Units and (ii) purchases that would violate Section 13.1 of the
Limited Partnership Agreement (which generally requires that a Limited Partner
transfer a minimum of five Units (other than Limited Partners who hold Units
in an IRA or Xxxxx Plan, who must tender a minimum of two Units)). If the
number of Units validly tendered and not properly withdrawn on or prior to the
Expiration Date is less than or equal to 30,000 Units, the Purchaser (which is
an affiliate of the General Partner) will purchase all Units so tendered and
not withdrawn, upon the terms and subject to the conditions of the Offer.
If proration of tendered Units is required, then, subject to the
Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange Act
of 1934 (the "Exchange Act") to pay Limited Partners the Purchase Price in
respect of Units tendered or return those Units promptly after the termination
or withdrawal of the Offer, the Purchaser (which is an affiliate of the
General Partner) does not intend to pay for any Units accepted for payment
pursuant to the Offer until the final proration results are known.
NOTWITHSTANDING ANY SUCH DELAY IN PAYMENT, NO INTEREST WILL BE PAID ON THE
PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The
Purchaser (which is an affiliate of the General Partner) reserves the right
(but in no event shall be obligated), in its sole discretion, to waive any or
all of those conditions. If, on or prior to the Expiration Date, any or all of
the conditions have not been satisfied or waived, the Purchaser reserves the
right to (i) decline to purchase any of the Units tendered and terminate the
Offer, (ii) waive all of the unsatisfied conditions and, subject to complying
with applicable rules and regulations of the Commission, purchase all Units
validly tendered, (iii) extend the Offer and, subject to the right of Limited
Partners to withdraw Units until the Expiration Date, retain the Units that
have been tendered during the period or periods for which the Offer is
extended, and/or (iv) amend the Offer.
This Offer to Purchase and the related Assignment of Partnership
Interest are being mailed by the Purchaser (which is an affiliate of the
General Partner) to the persons shown by the Partnership's records to have
been Limited
5
Partners or (in the case of Units owned of record by IRAs and qualified plans)
beneficial owners of Units as of December 1, 1997.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Units validly tendered and not withdrawn in
accordance with the procedures specified in Section 4, as promptly as
practicable following the Expiration Date. A tendering beneficial owner of
Units whose Units are owned of record by an IRA or other qualified plan will
not receive direct payment of the Purchase Price; rather, payment will be made
to the custodian of such account or plan. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of a properly completed and duly executed Assignment of Partnership
Interest and any other documents required by the Assignment of Partnership
Interest. See Section 3. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of
the General Partner) will be deemed to have accepted for payment pursuant to
the Offer, and thereby purchased, validly tendered Units if, as and when the
Purchaser (which is an affiliate of the General Partner) gives verbal or
written notice to the Depositary of the Purchaser's acceptance of those Units
for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Units accepted for payment pursuant to
the Offer will be made by deposit of the Purchase Price with the Depositary,
which will act as agent for tendering Limited Partners for the purpose of
receiving payments from the Purchaser and transmitting those payments to
Limited Partners whose Units have been accepted for payment.
If any tendered Units are not purchased for any reason, the
Assignment of Partnership Interest with respect to such Units will be
destroyed by the Purchaser (which is an affiliate of the General Partner). If
for any reason acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Purchaser is unable to accept for
payment, purchase or pay for Units tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights under Section 14, the Depositary
may, nevertheless, on behalf of the Purchaser (which is an affiliate of the
General Partner) retain tendered Units, and those Units may not be withdrawn
except to the extent that the tendering Limited Partners are entitled to
withdrawal rights as described in Section 4; subject, however, to the
Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay
Limited Partners the Purchase Price in respect of Units tendered or return
those Units promptly after termination or withdrawal of the Offer.
The Purchaser (which is an affiliate of the General Partner) reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of the Purchaser's affiliates, the right to purchase Units tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer or prejudice the rights of
tendering Limited Partners to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Units must be validly tendered and not withdrawn on or prior
to the Expiration Date. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest and any other documents required
by the Assignment of Partnership Interest must be received by the Depositary,
at its address set forth on the back cover of this Offer to Purchase, on or
prior to the Expiration Date. A Limited Partner may tender any or all of the
Units owned by that Limited Partner; provided, however, that because of
restrictions in the Limited Partnership Agreement, a partial tender of Units
must be for a minimum of five Units (other than Limited Partners who hold
Units in an IRA or Xxxxx Plan, who must tender a minimum of two Units).
Accordingly, any Limited Partner that owns five or fewer Units (or, for
Limited Partners who hold Units in an IRA or Xxxxx Plan, two or fewer Units)
must tender all or none of its Units. Tenders of fractional Units will not be
permitted, except by a Limited Partner who is tendering all of the Units owned
by that Limited Partner. No alternative, conditional or contingent tenders
will be accepted.
6
Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Units and payment is to be made
directly to that holder, then no signature guarantee is required on the
Assignment of Partnership Interest. Similarly, if the Units are tendered for
the account of a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. or a commercial
bank, savings bank, credit union, savings and loan association or trust
company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Assignment
of Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE
ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION. Please contact the Information Agent for assistance in obtaining
a signature guarantee.
Delivery of Assignment of Partnership Interest. The method of
delivery of the Assignment of Partnership Interest and all other required
documents is at the option and risk of the tendering Limited Partner, and
delivery will be deemed made only when actually received by the Depositary. In
all cases, sufficient time should be allowed to assure timely delivery.
Appointment as Proxy; Power of Attorney. By executing an Assignment
of Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the General Partner), and its managers and
designees as the Limited Partner's proxies, in the manner set forth in the
Assignment of Partnership Interest, each with full power of substitution, to
the full extent of the Limited Partner's rights with respect to the Units
tendered by the Limited Partner and accepted for payment by the Purchaser
(which is an affiliate of the General Partner). Each such proxy shall be
considered coupled with an interest in the tendered Units. Such appointment
will be effective when, and only to the extent that, the Purchaser (which is
an affiliate of the General Partner) accepts the tendered Units for payment.
Upon such acceptance for payment, all prior proxies given by the Limited
Partner with respect to the Units will, without further action, be revoked,
and no subsequent proxies may be given (and if given will not be effective).
The Purchaser (which is an affiliate of the General Partner) and its managers
and designees will, as to those Units, be empowered to exercise all voting and
other rights of the Limited Partner as they in their sole discretion may deem
proper at any meeting of Limited Partners, by written consent or otherwise.
The Purchaser (which is an affiliate of the General Partner) reserves the
right to require that, in order for Units to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of the Units, the
Purchaser must be able to exercise full voting rights with respect to the
Units, including voting at any meeting of Limited Partners then scheduled or
acting by written consent without a meeting.
By executing an Assignment of Partnership Interest, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and
its managers and designees as the Limited Partner's attorneys-in-fact, each
with full power of substitution, to the full extent of the Limited Partner's
rights with respect to the Units tendered by the Limited Partner and accepted
for payment by the Purchaser. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts the tendered Units for payment.
The tendering Limited Partner agrees not to exercise any rights pertaining to
the tendered Units without the prior consent of the Purchaser. Upon such
acceptance for payment, all prior powers of attorney granted by the Limited
Partner with respect to such Units will, without further action, be revoked,
and no subsequent powers of attorney may be granted (and if granted will not
be effective). Pursuant to such appointment as attorneys-in-fact, the
Purchaser and its managers and designees each will have the power, among other
things, (i) to transfer ownership of such Units on the Partnership books
maintained by the General Partner (and execute and deliver any accompanying
evidences of transfer and authenticity any of them may deem necessary or
appropriate in connection therewith), (ii) upon receipt by the Depositary (as
the tendering Limited Partner's agent) of the Purchase Price, to become a
substituted Limited Partner, to receive any and all distributions made by the
Partnership on or after the date on which the Purchaser purchases such Units,
and to receive all benefits and otherwise exercise all rights of beneficial
ownership of such Units in accordance with the terms of the Offer, (iii) to
execute and deliver to the General Partner a change of address form
instructing the General Partner to send any and all future distributions to
which the Purchaser is entitled pursuant to the terms of the Offer in respect
of tendered Units to the address specified in such form, and (iv) to endorse
any check payable to or upon the order of such Limited Partner representing a
distribution to which the Purchaser is entitled pursuant to the terms of the
Offer, in each case in the name and on behalf of the tendering Limited
Partner.
7
Assignment of Interest in Future Distributions. By executing an
Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the General Partner) and
its assigns all of the right, title and interest of the Limited Partner in and
to any and all distributions made by the Partnership on or after the date on
which the Purchaser purchases such Units, in respect of the Units tendered by
such Limited Partner and accepted for payment by the Purchaser, regardless of
the fact that the record date for any such distribution may be a date prior to
the date of such purchase. The Purchaser will seek to be admitted to the
Partnership as a substituted Limited Partner upon consummation of the Offer.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Units pursuant to the Offer will be determined by the Purchaser
(which is an affiliate of the General Partner), in its sole discretion, which
determination shall be final and binding. The Purchaser (which is an affiliate
of the General Partner) reserves the absolute right to reject any or all
tenders of any particular Units determined by it not to be in proper form or
if the acceptance of or payment for those Units may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser (which is an affiliate of the
General Partner) also reserves the absolute right to waive or amend any of the
conditions of the Offer that it is legally permitted to waive as to the tender
of any particular Units and to waive any defect or irregularity in any tender
with respect to any particular Units of any particular Limited Partner. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Assignment of Partnership Interest and the Instructions thereto) will be
final and binding. No tender of Units will be deemed to have been validly made
until all defects and irregularities have been cured or waived. None of the
Purchaser (which is an affiliate of the General Partner), the Information
Agent, the Depositary or any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Units or
will incur any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, each tendering Limited Partner must provide the
Purchaser (which is an affiliate of the General Partner) with the Limited
Partner's correct taxpayer identification number by completing the Substitute
Form W-9 included in the Assignment of Partnership Interest. See the
Instructions to the Assignment of Partnership Interest and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Unit purchased, each tendering Limited Partner
must complete the FIRPTA Affidavit included in the Assignment of Partnership
Interest certifying the Limited Partner's taxpayer identification number and
address and that such Limited Partner is not a foreign person.
See the Instructions to the Assignment of Partnership Interest and Section 6.
Binding Obligation. A tender of Units pursuant to and in accordance
with the procedures described in this Section 3 and the acceptance for payment
of such Units will constitute a binding agreement between the tendering
Limited Partner and the Purchaser (which is an affiliate of the General
Partner) on the terms set forth in this Offer to Purchase and in the
Assignment of Partnership Interest.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Units pursuant to the Offer
are irrevocable, except that Units tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless already
accepted for payment as provided in this Offer to Purchase, may also be
withdrawn at any time after February 14, 1998. For withdrawal to be effective,
a written or facsimile transmission notice of withdrawal must be timely
received by the Depositary at its address set forth on the back cover of this
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Units to be withdrawn and must be signed by the
person(s) who signed the Assignment of Partnership Interest in the same manner
as the Assignment of Partnership Interest was signed (including signature
guarantees by an Eligible Institution). Units properly withdrawn will be
deemed not to be validly tendered for purposes of the Offer. Withdrawn Units
may be re-tendered, however, by following the procedures described in Section
3 at any time prior to the Expiration Date.
8
If payment for Units is delayed for any reason or if the Purchaser
(which is an affiliate of the General Partner) is unable to pay for Units for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
tendered Units may be retained by the Depositary and may not be withdrawn
except to the extent that tendering Limited Partners are entitled to
withdrawal rights as set forth in this Section 4; subject, however, to the
Purchaser's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay Limited Partners the Purchase Price in respect of Units tendered or return
those Units promptly after termination or withdrawal of the Offer.
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser (which is an
affiliate of the General Partner), in its sole discretion, which determination
shall be final and binding. None of the Purchaser, the Information Agent, the
Depositary or any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser (which is an affiliate of the General Partner) expressly reserves
the right, in its sole discretion, at any time and from time to time, (i) to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, validly tendered Units, (ii)
to terminate the Offer and not accept for payment any Units not already
accepted for payment or paid for, (iii) upon the occurrence of any of the
conditions specified in Section 14, to delay the acceptance for payment of, or
payment for, any Units not already accepted for payment or paid for, and (iv)
to amend the Offer in any respect (including, without limitation, by
increasing the consideration offered, increasing or decreasing the number of
Units being sought, or both). Notice of any such extension, termination or
amendment will be disseminated promptly to Limited Partners in a manner
reasonably designed to inform Limited Partners of such change in compliance
with Rule 14d-4(c) under the Exchange Act. In the case of an extension of the
Offer, the extension will be followed by a press release or public
announcement which will be issued no later than 9:00 a.m., New York City time,
on the next business day after the then scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Units) is delayed in its payment for Units or is unable to pay
for Units pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Units
and those Units may not be withdrawn except to the extent tendering Limited
Partners are entitled to withdrawal rights as described in Section 4; subject,
however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Limited Partners the Purchase Price in respect of Units
tendered or return those Units promptly after termination or withdrawal of the
Offer.
If the Purchaser (which is an affiliate of the General Partner) makes
a material change in the terms of the Offer or the information concerning the
Offer or waives a material condition of the Offer, the Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer will depend upon
the facts and circumstances, including the relative materiality of the change
in the terms or information. In the Commission's view, an offer should remain
open for a minimum of five business days from the date the material change is
first published, sent or given to securityholders, and if material changes are
made with respect to information that approaches the significance of price or
the percentage of securities sought, a minimum of ten business days may be
required to allow for adequate dissemination to securityholders and investor
response. As used in this Offer to Purchase, "business day" means any day
other than a Saturday, Sunday or a federal holiday, and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Units pursuant to the Offer.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations thereunder, administrative rulings,
practice and procedures and judicial
9
authority, all as of the date of the Offer. All of the foregoing are subject
to change, and any such change could affect the continuing accuracy of this
summary. This summary does not discuss all aspects of federal income taxation
that may be relevant to a particular Limited Partner in light of such Limited
Partner's specific circumstances or to certain types of Limited Partners
subject to special treatment under the federal income tax laws (for example,
foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor (except as otherwise expressly indicated) does
it describe any aspect of state, local, foreign or other tax laws. Sales of
Units pursuant to the Offer will be taxable transactions for federal income
tax purposes, and also may be taxable transactions under applicable state,
local, foreign and other tax laws. EACH LIMITED PARTNER SHOULD CONSULT ITS OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF
SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Limited Partner's "amount realized" on the sale and (ii) the
Limited Partner's adjusted tax basis in the Units sold. Generally, a Limited
Partner's adjusted tax basis with respect to a Unit equals its cost, increased
by the amount of income and the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit, and decreased by (i)
any distributions made with respect to such Unit, (ii) the amount of
deductions or losses allocated to the Unit and (iii) any decrease in the
amount of Partnership liabilities (as determined under Code Section 752)
allocated to the Unit. Thus, the amount of a Limited Partner's adjusted tax
basis in tendered Units will vary depending upon the Limited Partner's
particular circumstances. The "amount realized" with respect to a Unit will be
a sum equal to the amount of cash received by the Limited Partner for the Unit
pursuant to the Offer, plus the amount of the Partnership's liabilities
allocable to the Unit (as determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held
by the Limited Partner as a capital asset. Under the Taxpayer Relief Act of
1997, the capital gains rate for individuals and other non-corporate taxpayers
is reduced to 20% for sales of capital assets after July 28, 1997 if such
assets were held for more than 18 months. However, any gain from the sale of
such assets attributable to the recapture of depreciation with respect to real
property (as defined in Code Section 1250) is taxed at a maximum rate of 25%.
The 28% rate continues to apply to individual and noncorporate taxpayers who
sell a capital asset held for more than one year but not more than 18 months.
Corporate taxpayers are taxed at a maximum marginal rate of 35% for both
capital gains and ordinary income. The maximum marginal federal income tax
rate for ordinary income of individuals and other noncorporate taxpayers is
39.6%. Capital losses are deductible only to the extent of capital gains,
except that, subject to the passive activity loss limitations discussed below,
non-corporate taxpayers may deduct up to $3,000 of capital losses in excess of
the amount of their capital gains against ordinary income. Excess capital
losses generally can be carried forward to succeeding years (a corporation's
carryforward period is five years and a non-corporate taxpayer can carry
forward such losses indefinitely); and a corporation is permitted to carry
back excess capital losses to the three preceding taxable years, provided the
carryback does not increase or produce a net operating loss for any of those
years.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Limited Partnership
Agreement concerning transfers of Units. Such allocation and any cash
distributed by the Partnership to the Limited Partner for that year will
affect the Limited Partner's adjusted tax basis in Units and, therefore, the
amount of such Limited Partner's taxable gain or loss upon a sale of Units
pursuant to the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain realized by a Limited Partner is attributable to "unrealized
receivables" (which includes depreciation recapture) or "substantially
appreciated inventory" as defined in Code Section 751, then a portion of the
Limited Partner's gain or loss may be ordinary rather than capital and, in
addition, a portion of such gain may be taxed at the 25% rate discussed above.
A portion, if not all, of the gain upon the sale of Units is expected to be
attributable to unrealized receivables. A Limited Partner who tenders Units
which are purchased pursuant to the Offer must file an information statement
with such Limited Partner's federal income tax return for the year of the sale
which provides the information
10
specified in Treasury Regulation ss. 1.751-1(a)(3). A selling Limited Partner
also must notify the Partnership of the date of the transfer and the names,
addresses and tax identification numbers of the transferor(s) and transferee
within 30 days of the date of the transfer (or, if earlier, by January 15 of
the following calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. A substantial portion of any post-1986 losses
of Limited Partners from the Partnership would have been passive losses. Thus,
Limited Partners may have "suspended" passive losses from the Partnership
(i.e., post-1986 net taxable losses in excess of statutorily permitted
"phase-in" amounts which have not been used to offset income from other
passive activities or from the Partnership). Substantially all gain or loss
from a sale of Units pursuant to the Offer will be passive income or loss.
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses, if any (including a portion of any loss
recognized on the sale of Units), can be currently deducted (subject to other
applicable limitations) to the extent of the Limited Partner's passive income
from the Partnership for that year (including any gain recognized on the sale
of Units) plus any other passive income for that year. If, on the other hand,
a Limited Partner sells 100% of its Units pursuant to the Offer, any
"suspended" losses and any losses recognized upon the sale of the Units will
be offset first against any other net passive gain to the Limited Partner from
the sale of the Units and any other net passive activity income from other
passive activity investments, and the balance of any "suspended" net losses
from the Units will no longer be subject to the passive activity loss
limitation and, therefore, will be deductible by such Limited Partner from its
other income (subject to any other applicable limitations), including ordinary
income. If a tendering Limited Partner has suspended passive losses from the
Partnership, such Limited Partner must sell all of its Units to receive these
tax benefits. If more than 30,000 of the outstanding Units are tendered, some
tendering Limited Partners may not be able to sell 100% of their Units
pursuant to the Offer because of proration of the number of Units to be
purchased by the Purchaser. See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). Accordingly, it is possible that transfers of Units made pursuant to
the Offer, in combination with other transfers made within twelve months of
the Offer, will result in a termination of the Partnership. In the event of a
termination, the Partnership's tax year would close and the Partnership would
be treated for income tax purposes as if it had contributed all of its assets
and liabilities to a "new" partnership in exchange for an interest in the
"new" partnership. The Partnership would then be treated as making a
distribution of the interests in the "new" partnership to the new partners and
the remaining partners, followed by the liquidation of the Partnership.
Because the "new" partnership would be treated as having acquired its assets
on the date of the deemed contribution, a new depreciation recovery period
would begin on such date, the Partnership's annual depreciation deductions
over the next few years would be substantially reduced, and the Partnership
would have greater taxable income (or less tax loss) than if no tax
termination occurred. In addition, depreciation may be required to be
allocated to those Limited Partners that have a higher tax basis, such as the
Purchaser. A tax termination would not affect a Limited Partner who sells all
of his Units but would affect the taxation of a Limited Partner in respect of
any Units retained after the date of the tax termination. A tax termination of
the Partnership would also terminate any partnership in which the Partnership
holds a majority interest (50% or more).
The Purchaser believes that even if the maximum number of Units is
purchased pursuant to the Offer, those transfers will not cause a tax
termination.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Units may be subject to 31% backup withholding unless those Limited
Partners provide a taxpayer identification number ("TIN") and certify that the
TIN is correct or properly certify that they are awaiting a TIN. A Limited
Partner may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Assignment of Partnership
Interest. If a
11
Limited Partner who is subject to backup withholding does not properly
complete and sign the Substitute Form W-9, the Purchaser will withhold 31%
from payments to such Limited Partner.
Xxxx realized by a foreign Limited Partner on the sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under Code
Section 1445, the transferee of an interest held by a foreign person in a
partnership which owns United States real property generally is required to
deduct and withhold a tax equal to 10% of the amount realized on the
disposition. In order to comply with this requirement, the Purchaser will
withhold 10% of the amount realized by a tendering Limited Partner unless the
Limited Partner properly completes and signs the FIRPTA Affidavit included as
part of the Assignment of Partnership Interest certifying the Limited
Partner's TIN and address, and that such Limited Partner is not a foreign
person. Amounts withheld would be creditable against a foreign Limited
Partner's federal income tax liability and, if in excess thereof, a refund
could be obtained from the Internal Revenue Service by filing a U.S. income
tax return.
SECTION 7. EFFECTS OF THE OFFER.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Units are purchased pursuant to the
Offer, the result will be a reduction in the number of Limited Partners. In
the case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Units and,
therefore, the Purchaser (which is an affiliate of the General Partner) does
not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for their
Units through secondary market transactions. See Section 13 for certain
limited information regarding recent secondary market sales of the Units.
The Units are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser (which is an affiliate of the General Partner) does not
expect or intend that consummation of the Offer will cause the Units to cease
to be registered under Section 12(g) of the Exchange Act. If the Units were to
be held by fewer than 300 persons, the Partnership could apply to de-register
the Units under the Exchange Act. Because the Units are widely held, however,
the Purchaser (which is an affiliate of the General Partner) believes that,
even if it purchases the maximum number of Units in the Offer, after that
purchase the Units will be held of record by substantially more than 300
persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser and its managers and designees as
proxies with respect to the Units tendered by such Limited Partners and
accepted for payment by the Purchaser.
See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 15,845 Units pursuant to the Offer (or
otherwise), IPT (which controls the General Partner, IPLP and the Purchaser)
will own in excess of 50% of the total outstanding Units and, as a result,
will be able to control the outcome of all voting decisions with respect to
the Partnership, other than decisions concerning a "roll-up" transaction prior
to January 1, 2000. Even if the Purchaser acquires a lesser number of Units
pursuant to the Offer, however, because IPT already owns (through IPLP)
approximately 28.9% of the outstanding Units, it will be able to significantly
influence the outcome of almost all voting decisions with respect to the
Partnership. In general, IPLP and the Purchaser (which are affiliates of the
General Partner) will vote the Units owned by them in whatever manner they
deem to be in the best interests of IPT, which, because of their relationship
with the General Partner, also may be
12
in the interest of the General Partner, but may not be in the interest of
other Limited Partners. This could (i) prevent non-tendering Limited Partners
from taking action they desire but that IPT opposes and (ii) enable IPT to
take action desired by IPT but opposed by non-tendering Limited Partners.
Under the Limited Partnership Agreement, Limited Partners holding a majority
of the Units are entitled to take action with respect to a variety of matters,
including: removal of a general partner and in certain circumstances election
of new or successor general partners; dissolution of the Partnership; the sale
of all or substantially all of the assets of the Partnership; and most types
of amendments to the Limited Partnership Agreement. However, under the terms
of the Stipulation (as defined in Section 13), the General Partner is required
to prohibit the Partnership from entering into a "roll-up" transaction
involving the General Partner or any of its affiliates prior to January 1,
2000 unless such "roll-up" transaction is approved by Limited Partners holding
at least a majority of the outstanding Units not held by persons affiliated
with the General Partner.
The Offer will not result in any change in the compensation payable
to the General Partner or its affiliates. However, as a result of the Offer,
the Purchaser (which is an affiliate of the General Partner) will participate,
in its capacity as a Limited Partner, in any subsequent distributions to
Limited Partners to the extent of the Units purchased pursuant to the Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the General Partner), is
seeking to acquire Units pursuant to the Offer in order to increase its equity
interest in the Partnership, primarily for investment purposes and with a view
to making a profit. Following the completion of the Offer, IPT and/or persons
related to or affiliated with it may acquire additional Units. Any such
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable. Any such
acquisition may be at a price higher or lower than the price to be paid for
the Units purchased pursuant to the Offer, and may be for cash or other
consideration. Insignia and IPT (which are affiliates of the General Partner)
also may consider disposing of some or all of the Units the Purchaser acquires
pursuant to the Offer, either directly or by a sale or other disposition of
one or more interests in IPT or IPLP, depending among other things on the
requirements from time to time of Insignia, IPT and their affiliates in light
of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to a liquidation of
the Partnership or a sale or refinancing of any of the Partnership's
properties. However, IPT and the Purchaser expect that consistent with the
General Partner's fiduciary obligations, the General Partner will seek and
review opportunities (including opportunities identified by IPT and the
Purchaser) to engage in transactions which could benefit the Partnership, such
as sales or refinancings of assets or a combination of the Partnership with
one or more other entities, with the objective of seeking to maximize returns
to Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as
part of a complete liquidation; and (iv) mergers or other consolidation
transactions involving the Partnership. Any such merger or consolidation
transaction could involve other limited partnerships in which the General
Partner or its affiliates serve as general partners, or a combination of the
Partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of IPT (which is an affiliate of the General Partner) or
IPT itself), in any of which Limited Partners might receive cash, common stock
or other securities or consideration. There is no assurance, however, as to
when or whether any of the transactions referred to above might occur. If any
such transaction is effected by the Partnership and financial benefits accrue
to the Limited Partners of the Partnership, the Purchaser (and thus IPT) will
participate in those benefits to the extent of its ownership of Units. A
merger or other consolidation transaction and certain kinds of other
extraordinary transactions would require a vote of the Limited Partners, and,
so long as such transaction does not involve a "roll-up" prior to January 1,
2000, if the Purchaser is successful in acquiring more than 15,845 Units
pursuant to the Offer (or otherwise), IPT will be able to control the outcome
of any such vote. If such a transaction does involve a "roll-up," however, it
must be approved by Limited Partners holding at least a majority of the
13
outstanding Units not held by persons affiliated with the General Partner. See
Section 13. Even if the Purchaser acquires a lesser number of Units pursuant
to the Offer, however, because IPT already owns (through IPLP) approximately
28.9% of the outstanding Units it will be able to significantly influence the
outcome of almost all voting decisions with respect to the Partnership. IPT's
primary objective in seeking to acquire the Units through the Purchaser
pursuant to the Offer is not, however, to influence the vote on any particular
transaction, but rather to generate a profit on the investment represented by
those Units.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Except as
otherwise indicated, information contained in this Section 9 is based upon
documents and reports publicly filed by the Partnership with the Commission.
Although the Purchaser has no information that any statements contained in
this Section 9 are untrue, the Purchaser cannot take responsibility for the
accuracy or completeness of any information contained in this Section 9 which
is derived from such public documents, or for any failure by the Partnership
to disclose events which may have occurred and may affect the significance or
accuracy of any such information but which are unknown to the Purchaser.
General. The Partnership was organized on July 16, 1982 under the
laws of the State of California. Its principal executive offices are located
at Xxx Xxxxxxxx Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its
telephone number at that address is (000) 000-0000.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was formed to invest in, acquire, manage
and ultimately sell income-producing real properties which are improved or
capable of improvement or which will be improved within a reasonable period
after acquisition.
The Partnership's investment portfolio currently consists of two
residential apartment complexes: a 304- unit complex in Salt Lake City, Utah;
and a 420-unit complex in Dallas, Texas.
Originally Anticipated Term of Partnership; Alternatives. According
to the Partnership's Prospectus dated November 5, 1982, the General Partner
anticipated that the Partnership would sell its properties five to eight years
after their acquisition, depending upon the then current real estate and money
markets, economic climate and income tax consequences to the Limited Partners.
Under the Limited Partnership Agreement, the term of the Partnership will
continue until December 31, 2007, unless sooner terminated as provided in the
Limited Partnership Agreement or by law. Limited Partners could, as an
alternative to tendering their Units, take a variety of possible actions
including voting to liquidate the Partnership or causing the Partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market
conditions. The General Partner monitors each property's specific locale and
sub-market conditions evaluating current trends, competition, new construction
and economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement requirements.
In addition, the financing structure for each property, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision of the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. The Purchaser (which is an affiliate of the General
Partner) has been advised by the General Partner that the Partnership recently
received an unsolicited offer by an unaffiliated third party to purchase
Overlook Apartments in Salt Lake City, Utah for $16,250,000. Based on the
foregoing considerations, however, the General Partner has determined that it
is not in the best interest of the Limited Partners to sell or refinance that
or any other Partnership property at the present time.
Selected Financial and Property-Related Data. Set forth below is a
summary of certain financial and statistical information with respect to the
Partnership and its properties, all of which has been excerpted or derived
from the Partnership's Annual Reports on Form 10-KSB for the year ended
December 31, 1996 and on Form 10-K for the years ended December 31, 1995,
1994, 1993 and 1992 and the Partnership's Quarterly Reports on Form
14
10-QSB for the periods ended September 30, 1997 and 1996. More comprehensive
financial and other information is included in such reports and other
documents filed by the Partnership with the Commission, and the following
summary is qualified in its entirety by reference to such reports and other
documents and all the financial information and related notes contained
therein.
CENTURY PROPERTIES FUND XVIII
SELECTED FINANCIAL DATA
(in thousands, except Unit data)
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- ---------
(UNAUDITED)
Statements of Operations Data:
Rental Income................. $ 3,438 $ 3,297 $ 4,414 $ 4,265 $ 4,437 $ 8,877 $11,212
Other Income.................. $ 240 $ 251 $ 323 $ 278 $ 1,292 $ 1,824 $ 36
Total Revenues............. $ 3,678 $ 3,548 $ 4,737 $ 4,543 $ 5,729 $10,701 $11,248
Income (Loss) from Operations
(before extraordinary item) $ 368 $ 173 $ 146 $ (4) $ 732 $(4,938) $(3,875)
Net Income (Loss)............. $ 476 $ 173 $ 146 $ (4) $ 732 $ 1,563 $(3,875)
Net Income (Loss) per Unit.... $ 5.72 $ 2.08 $ 1.76 $ (.05) $ 9 $ 18 $ (47)
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
----------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- ---------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $20,010 $19,744 $19,705 $19,840 $20,053 $34,296 $61,081
Total Liabilities............. $19,095 $19,278 $19,266 $19,547 $19,756 $34,731 $63,079
Limited Partners' Equity ..... $ 7,279 $ 6,874 $ 6,850 $ 6,718 $ 6,722 $ 6,064 $ 4,679
Units Outstanding............. 75,000 75,000 75,000 75,000 75,000 75,000 75,000
Book Value per Unit........... $ 97.05 $ 91.65 $ 91.33 $ 89.57 $ 89.63 $ 80.85 $ 62.39
Description of Properties. Set forth below is a table showing the
location, the date of purchase, the nature of the Partnership's ownership
interest in and the use of each of the Partnership's properties.
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
---------------------------- ----------------- ------------------------------ -------------------------
Overlook Apartments 07/83 Fee ownership Residential Apartments
Salt Lake City, Utah (subject to first mortgage) (304 units)
Oak Run Apartments 11/83 Fee ownership Residential Apartments
Dallas, Texas (subject to first mortgage) (420 units)
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value, accumulated depreciation and federal tax basis of
each of the Partnership's properties as of December 31, 1996 ($ amounts in
thousands).
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
----------------------------------- -------------- ------------- ---------- ----------- -----------
Overlook Apartments $ 10,008 $ 4,053 5-30 yrs. S/L $ 2,456
Oak Run Apartments 16,693 5,037 5-30 yrs. S/L 3,774
--------- --------- ---------
TOTALS $ 26,701 $ 9,090 $ 6,230
========= ========= =========
15
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1996 ($ amounts in thousands).
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1996 RATE AMORTIZED DATE MATURITY
----------------------------------- --------------- ----------- ------------ ------------- ------------
Overlook Apartments $ 8,049 8.25% 30 yrs. 01/1999 $ 7,877
Oak Run Apartments (1)
1st Mortgage 6,966 (2) 30 yrs. 09/2000 6,888
Participating Note 3,660 (3) N/A N/A 3,660(4)
------- -------
TOTALS $18,675 $18,425
======= =======
(1) In September 1997, the Partnership refinanced the mortgage
indebtedness encumbering Oak Run Apartments. The new
indebtedness, totalling $10,600,000 carries a stated interest
rate of 7.36% and matures in October 2004. The proceeds from the
refinancing allowed the Partnership to pay off its first mortgage
and participating note.
(2) Variable rate at 4.25% over 30-day LIBOR.
(3) Payments to former lender as a participation in future cash flow
and sales proceeds from the property.
(4) Represents balance currently due, assuming no further principal
reduction.
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for each of
the Partnership's properties during the past two years.
AVERAGE ANNUAL RENTAL RATE AVERAGE ANNUAL OCCUPANCY
------------------------------------------- ------------------------------
PROPERTY 1996 1995 1996 1995
----------------------------------- ---------------------- --------------------- ---------------- -------------
Overlook Apartments $6,740/unit $6,416/unit 96% 96%
Oak Run Apartments $6,150/unit $5,848/unit 96% 98%
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1996 for each of the Partnership's
properties.
1996 1996
PROPERTY BILLING RATE
--------------------- ---------- ------
Overlook Apartments $ 74,000 1.36%
Oak Run Apartments $290,000 2.59%
Other Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial results and other matters. Such reports and other documents may be
inspected at the Commission's Public Reference Section, Room 1024, 000 Xxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, where copies may be obtained at
prescribed rates, and at the regional offices of the Commission located in the
Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
and 7 World Trade Center, New York, New York 10048. Copies should be available
by mail upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000. The Commission also maintains a web site that contains reports, proxy
and other information filed electronically with the Commission, the address of
which is xxxx://xxx.xxx.xxx.
Cash Distributions History. The Partnership made cash distributions
to the Limited Partners of $8.58 per Unit in 1997 (through December 17). Prior
to the 1997 distribution, the last distribution made by the Partnership to
Limited Partners was in 1986 ($5.00 per Unit). In total, original investors in
the Partnership have received distributions of only $66.88 in respect of their
original $1,000 investment made in 1983.
Operating Budgets of the Partnership. A summary of the fiscal 1996
and 1997 operating budgets and the audited results of operations for fiscal
1996 of the Partnership are set forth in the table below. The budgeted amounts
provided below are figures that were not computed in accordance with generally
accepted accounting
16
principles ("GAAP"). Historically, budgeted operating results of operations
for a particular fiscal year have differed significantly in certain respects
from the audited operating results for that year. In particular, items that
are categorized as capital expenditures for purposes of preparing the
operating budgets are often re-categorized as expenses when the financial
statements are audited and presented in accordance with GAAP. Therefore, the
summary operating budgets presented for fiscal 1997 should not necessarily be
considered as indicative of what the audited operating results for fiscal 1997
will be. Furthermore, any estimate of the future performance of a business,
such as the Partnership's business, is forward-looking and based on numerous
assumptions, some of which inevitably will prove to be incorrect. For this
reason, it is probable that the Partnership's future operating results will
differ from those projected in the operating budget, and those differences may
be material. Therefore, such information should not be relied on by Limited
Partners.
FISCAL 1996 FISCAL 1996 FISCAL 1997
BUDGETED AUDITED BUDGETED
------------ ------------ ------------
Total Revenues from Property Operations................. $ 4,625,452 $ 4,737,000 $ 4,890,042
Total Operating Expenses ............................... $ 2,067,310 $ 2,221,000 $ 2,275,963
Net Operating Income.................................... $ 2,558,142 $ 2,516,000 $ 2,614,079
Capital Expenditures.................................... $ 318,907 $ 225,000 $ 268,542
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives
to seek to maximize the value of its ownership of Units, which in turn may
result in a conflict for the General Partner in attempting to reconcile the
interests of the Purchaser (which is an affiliate of the General Partner) with
the interests of the other Limited Partners. In addition, the Purchaser (which
is an affiliate of the General Partner) is making the Offer with a view to
making a profit. Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the General Partner) to purchase Units at
a low price and the desire of the Limited Partners to sell their Units at a
high price. The General Partner has indicated in the Schedule 14D-9 that it is
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Units pursuant to the Offer. LIMITED PARTNERS ARE URGED TO
READ THIS OFFER TO PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Voting by the Purchaser. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser (which is an affiliate of the
General Partner) and its managers and designees as proxies with respect to the
Units tendered by such Limited Partners and accepted for payment by the
Purchaser. See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 15,845 Units pursuant to the Offer (or
otherwise), IPT (which controls the General Partner, IPLP and the Purchaser)
will own in excess of 50% of the total outstanding Units and, as a result,
will be able to control the outcome of almost all voting decisions with
respect to the Partnership. Even if the Purchaser acquires a lesser number of
Units pursuant to the Offer, however, because IPT already owns (through IPLP)
approximately 28.9% of the outstanding Units it will be able to significantly
influence the outcome of almost all voting decisions with respect to the
Partnership. In general, IPLP and the Purchaser (which are affiliates of the
General Partner) will vote the Units
17
owned by them in whatever manner they deem to be in IPT's best interests,
which, because of their relationship with the General Partner, also may be in
the interest of the General Partner, but may not be in the interest of other
Limited Partners. This could (i) prevent non-tendering Limited Partners from
taking action they desire but that IPT opposes and (ii) enable IPT to take
action desired by IPT but opposed by non-tendering Limited Partners. Under the
Limited Partnership Agreement, Limited Partners holding a majority of the
Units are entitled to take action with respect to a variety of matters,
including: removal of a general partner and in certain circumstances election
of new or successor general partners; dissolution of the Partnership; the sale
of all or substantially all of the assets of the Partnership; and most types
of amendments to the Limited Partnership Agreement. However, under the terms
of the Stipulation (as defined in Section 13), the General Partner is required
to prohibit the Partnership from entering into a "roll-up" transaction
involving the General Partner or any of its affiliates prior to January 1,
2000 unless such "roll-up" transaction is approved by Limited Partners holding
at least a majority of the outstanding Units not held by persons affiliated
with the General Partner. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Units it purchases pursuant to the
Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand to make such contributions. See Section 12. It
is possible, however, that in connection with its future financing activities,
IPT or IPLP may cause or request the Purchaser (which is an affiliate of the
General Partner) to pledge the Units as collateral for loans, or otherwise
agree to terms which provide IPT, IPLP and the Purchaser with incentives to
generate substantial near-term cash flow from the Purchaser's investment in
the Units. This could be the case, for example, if a loan has a "balloon"
maturity after a relatively short time or bears a high or increasing interest
rate. In such a situation, the General Partner may experience a conflict of
interest in seeking to reconcile the best interests of the Partnership with
the need of its affiliates for cash flow from the Partnership's activities.
Transactions with Affiliates. The Partnership, the General Partner
and NPI-AP (which is the property manager for the Partnership) were not
affiliates of Insignia prior to January 1996. Accordingly, this section only
discusses transactions between the Partnership, on the one hand, and Insignia
and its affiliates (including the General Partner and NPI-AP), on the other
hand, which have occurred since January 1996.
Under the Limited Partnership Agreement, the General Partner holds an
interest in the Partnership and is entitled to participate in certain cash
distributions made by the Partnership to its partners. The General Partner
received from the Partnership in respect of its interest in the Partnership
cash distributions of approximately $6,500 to date in 1997. The Partnership
paid NPI-AP property management fees for property management services in the
aggregate amounts of $235,000 for the year ended December 31, 1996 and
$181,000 for the nine-month period ended September 30, 1997. Insignia and its
affiliates do not receive any fees from the Partnership for the asset
management or partnership administration services they provide, although,
pursuant to the Limited Partnership Agreement, the General Partner and its
affiliates are entitled to be reimbursed by the Partnership for the expenses
they incur in connection with providing those services. The Partnership
reimbursed the General Partner and its affiliates for expenses incurred in
connection with asset management and partnership administration services
performed by them for the Partnership in the amounts of $154,000 for the year
ended December 31, 1996 and $93,000 during the first nine months of 1997. On
January 19, 1996, the Partnership began insuring its properties under a master
policy through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later
acquired by the agent who placed the current year's master policy. The current
agent assumed the financial obligations to the affiliate of the General
Partner who receives payments on these obligations from the agent. Insignia
and the General Partner believe that the aggregate financial benefit derived
by Insignia and its affiliates from the arrangement described in the three
preceding sentences has been immaterial.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of making the Offer. The Purchaser is a wholly-owned subsidiary of
IPLP. The Purchaser (which is an affiliate of the General Partner) has not
engaged in any business activity other
18
than in connection with the Offer and certain other tender offers for units of
limited partnership interests in other IPT Partnerships (as defined below)
being made contemporaneously with the Offer, and has no significant assets or
liabilities at the present time. Upon consummation of the Offer and such other
offers, the Purchaser's only significant assets will be the Units it acquires
pursuant to the Offer and the other limited partnership units it acquires
pursuant to such other offers.
The principal executive offices of the Purchaser (which is an
affiliate of the General Partner) are located at One Insignia Financial Plaza,
P.O. Box 19059, Greenville, South Carolina 29602, and its telephone number is
(000) 000-0000. For certain information concerning the managers of the
Purchaser (which is an affiliate of the General Partner), see Schedule II to
this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996 for the purpose
of acquiring and owning interests in multifamily residential properties,
principally through the ownership of limited and general partner interests in
real estate limited partnerships (including the Partnership). IPT has been
organized and operates in a manner that will qualify it to be taxed as a real
estate investment trust ("REIT") under the Code. Substantially all of IPT's
investments are held through IPLP, which is the operating partnership of IPT.
IPT is presently the sole general partner and Insignia is presently the sole
limited partner of IPLP.
In forming IPT, Insignia and its affiliates (i) transferred to IPT
equity interests in entities comprising or controlling the general partners of
36 public real estate limited partnerships (including the Partnership) (the
"IPT Partnerships") in exchange for common shares of beneficial interest of
IPT and (ii) transferred to IPLP limited partner interests in the IPT
Partnerships (or equity interests in entities owning limited partner interests
in the IPT Partnerships) in exchange for units of limited partner interest in
IPLP. The IPT Partnerships own, in the aggregate, 184 properties containing
approximately 42,000 residential apartment units and approximately 4.2 million
square feet of commercial space. See Schedule V for a list of the IPT
Partnerships.
IPT does not currently operate as a self-administered and
self-managed REIT, but rather has engaged Insignia to act as advisor to IPT
and IPLP. In such capacity, Insignia and its affiliates provide a broad range
of services to IPT and IPLP, including executive advisory, investment
advisory, acquisition, administrative, financial and accounting services,
including in connection with the Offer.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which is an
affiliate of Insignia) and Angeles Mortgage Investment Trust, an
unincorporated California business trust ("AMIT"), entered into a definitive
merger agreement (the "AMIT Merger Agreement"), pursuant to which AMIT is to
be merged with and into IPT, with IPT being the surviving entity, in a stock
for stock transaction (the "AMIT Merger"). XXXX is a public company whose
Class A shares trade on the American Stock Exchange under the symbol ANM.
Insignia and its affiliates currently own 96,800 (or approximately 3.7%) of
the 2,617,000 outstanding AMIT Class A shares and all of the 1,675,113
outstanding AMIT Class B shares. If the AMIT Merger is consummated, IPT will
become a publicly traded company (IPT presently intends to apply for listing
of its shares on the New York Stock Exchange, which listing would be subject
to completion of the AMIT Merger), and it is anticipated that Insignia and its
affiliates will own approximately 56% of post-merger IPT, the former AMIT
shareholders (other than Insignia and its affiliates) will own approximately
17% of post-merger IPT, and the current unaffiliated shareholders of IPT will
own the remaining 27% of post-merger IPT.
The XXXX Xxxxxx is expected to be completed in the first quarter of
1998. Consummation of the AMIT Merger is subject to several conditions,
including approval of the AMIT Merger Agreement and the AMIT Merger by the
respective shareholders of IPT and XXXX and the receipt by AMIT of a fairness
opinion from its financial advisor to the effect that the AMIT Xxxxxx is fair
to AMIT's shareholders from a financial point of view. Accordingly, there can
be no assurance as to when the AMIT Merger will occur, or that it will occur
at all.
IPT's principal executive offices are located at One Insignia
Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and its
telephone number is (000) 000-0000. For certain information concerning the
trustees
19
and executive officers of IPT, see Schedule III to this Offer to Purchase.
IPLP does not have any officers or employees.
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
INSIGNIA PROPERTIES TRUST
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except share and unit data)
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------- ----------------
(unaudited) (audited)
Statements of Operations Data:
Revenues............................................ $ 11,144 $ 9,705
Income Before Extraordinary Item.................... $ 2,930 $ 3,557
Net Income.......................................... $ 2,930 $ 2,425
Supplemental Data:
Funds From Operations(1)............................ $ 14,324 $ 12,563
IPT Common Shares Outstanding....................... 13,449,712 11,168,036
IPLP Units Outstanding.............................. 8,399,499 8,399,499
---------- ----------
IPT Common Shares and IPLP Units Outstanding(2)..... 21,849,211 19,567,535
========== ==========
Balance Sheets Data:
Cash................................................ $ 53,897 $ 4,928
Investments in IPT Partnerships(3).................. $ 126,505 $ 118,741
Long-Term Debt...................................... $ 19,300 $ 19,730
Shareholders' Equity(4)............................. $ 138,710 $ 121,068
(1) Funds from Operations represent income or loss from real estate
operations, which is net income or loss in accordance with GAAP, excluding
gains or losses from debt restructuring or sales of property, plus
depreciation and provision for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) Represents IPT's investment in 26 of the 36 IPT Partnerships which IPT
accounts for using the equity method. Of the remaining ten IPT
Partnerships, IPT accounts for nine using the cost method and one using
the consolidation method.
(4) Includes Insignia's investments in predecessor entities.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of
commercial properties. Insignia's real estate services include property
management, providing all of the day-to-day services necessary to operate a
property, whether residential or commercial; asset management, including
long-term financial planning, monitoring and implementing capital improvement
plans, and development and execution of refinancings and dispositions; real
estate leasing and brokerage; maintenance and construction services; marketing
and advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 2,600 properties, which include approximately 290,000
residential units (including cooperative and condominium units), and in excess
of 150 million square feet of retail, commercial and industrial space, located
in over 500 cities in 48 states. Insignia currently provides partnership
administration services to approximately 900 limited partnerships having
approximately 330,000 limited partners. Insignia is a public company whose
stock is traded on the New York Stock Exchange under the symbol IFS.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Certain information,
as of particular dates, concerning Insignia's business, principal properties,
capital structure, material pending legal proceedings, operating results,
financial condition, directors and officers (including their remuneration and
stock options granted to them), the
20
principal holders of Insignia's securities, any material interests of such
persons in transactions with Insignia and certain other matters is required to
be disclosed in proxy statements and annual reports distributed to Insignia's
shareholders and filed with the Commission. Such reports, proxy statements and
other information may be inspected and copied at the Commission's public
reference facilities and should also be available for inspection in the same
manner as set forth with respect to the Partnership in Section 9.
Insignia's principal executive offices are located at Xxx Xxxxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its telephone number is
(000) 000-0000. For certain information concerning the directors and executive
officers of Insignia, see Schedule IV to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1996, 1995 and 1994 and the nine-month periods ended
September 30, 1997 and 1996. More comprehensive financial and other
information is included in Insignia's Annual Report on Form 10-K for the year
ended December 31, 1996 (including management's discussion and analysis of
financial condition and results of operations) and in other reports and
documents filed by Insignia with the Commission. The financial information set
forth below is qualified in its entirety by reference to such reports and
documents filed with the Commission and the financial statements and related
notes contained therein. These reports and other documents may be examined and
copies thereof may be obtained in the manner set forth above.
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- ------------------------------------
1997 1996 1996 1995 1994
--------- ---------- ---------- ---------- ---------
(unaudited)
Statements of Operations Data:
Total Revenues.................................. $ 254,630 $ 149,204 $ 227,074 $ 123,032 $ 75,453
Income Before Taxes and Extraordinary Item...... $ 7,879 $ 8,097 $ 14,946 $ 10,093 $ 12,101
Net Income...................................... $ 4,727 $ 5,020 $ 8,564 $ 5,806 $ 7,261
Earnings Per Share.............................. $ 0.15 $ 0.15 $ 0.27 $ 0.20 $ 0.35
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
----------------------- ------------------------------------
1997 1996 1996 1995 1994
--------- ---------- ---------- ---------- ---------
(unaudited)
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 89,427 $ 60,131 $ 54,614 $ 49,846 $ 36,596
Receivables..................................... $ 73,657 $ 14,292 $ 46,040 $ 26,445 $ 13,572
Total Assets................................ $ 568,768 $ 471,889 $ 492,402 $ 245,409 $ 174,272
Accounts Payable................................ $ 8,767 $ 2,602 $ 1,711 $ 1,497 $ 3,478
Commissions Payable............................. $ 30,841 $ 9,257 $ 18,736 $ 602 --
Accrued and Sundry Liabilities.................. $ 50,893 $ 24,604 $ 40,741 $ 25,619 $ 18,790
Long-Term Debt.................................. $ 58,417 $ 205,590 $ 69,140 $ 42,996 $ 73,198
Total Liabilities........................... $ 148,918 $ 255,714 $ 130,328 $ 70,714 $ 95,466
Redeemable Convertible Preferred Stock.......... -- -- -- $ 15,000 --
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 143,993 -- $ 144,169 -- --
Minority Interest in Consolidated Subsidiaries.. $ 52,778 $ 2,762 -- $ 2,682 --
Shareholders' Equity........................ $ 223,079 $ 213,413 $ 217,905 $ 157,013 $ 78,806
Except as otherwise set forth herein and in Schedule I, none of the
Purchaser (which is an affiliate of the General Partner), IPLP, IPT, Insignia
or, to the best of the Purchaser's knowledge, any of the persons listed on
Schedules II, III or IV hereto, or any affiliate of the foregoing, (i)
beneficially owns or has a right to acquire any Units, (ii) has effected any
transaction in the Units in the last 60 days, or (iii) has any contract,
arrangement, understanding or relationship with any other person with respect
to any securities of the Partnership, including, but
21
not limited to, contracts, arrangements, understandings or relationships
concerning the transfer or voting thereof, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies. Xxxxxx X. Xxxxxx, who is the Chairman of
the Board, Chief Executive Officer and President of Insignia and a trustee of
IPT, beneficially owns approximately 28% of Insignia's outstanding common
stock and, as a result, may be deemed to beneficially own the Units owned by
IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $2,350,000 will be required to
purchase 30,000 Units, if tendered, and to pay related fees and expenses. The
Purchaser (which is an affiliate of the General Partner) expects to obtain all
of those funds from IPLP, which in turn intends to use its cash on hand.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation with the General Partner and NPI-AP. The General Partner
is organized as a California general partnership, the general partners of
which are: Fox Capital Management Corporation, a California corporation
("FCMC"); Fox Realty Investors, a California general partnership ("FRI"); and
Fox Partners 82, a California general partnership. FCMC is the managing
general partner of the General Partner. The managing general partner of FRI is
NPI Equity Investments II, Inc. ("NPI Equity"), which (prior to December 1996)
was a wholly-owned subsidiary of National Property Investors, Inc. ("NPI"). In
January 1996, IFGP Corporation, which is a wholly-owned subsidiary of
Insignia, acquired all of the outstanding stock of NPI (and thus all of the
outstanding stock of NPI Equity and the managing general partner interest in
FRI). In June 1996, Insignia Properties Corporation ("IPC"), which at the time
was a wholly-owned subsidiary of Insignia, acquired all of the outstanding
stock of FCMC. In December 1996, as part of the formation of IPT, NPI
contributed all of the outstanding stock of NPI Equity to IPT and IPC was
merged with and into IPT. As a result of the foregoing transactions, each of
FCMC and NPI Equity is now a wholly-owned subsidiary of IPT, and IPT controls
the General Partner. Fox Partners 82 is not affiliated with the Purchaser, IPT
or Insignia. NPI-AP, which is the property manager for the Partnership's
properties, is currently an indirect, wholly-owned subsidiary of Insignia.
Insignia acquired NPI-AP in January 1996 in connection with the foregoing
transactions.
Previous Tender Offers. Between October 1994 and June 1995, XxXxxxxx
Ventures I, L.P. ("XxXxxxxx") acquired 21,513 (or approximately 28.7%) of the
outstanding Units, at a purchase price of $21.50 per Unit, pursuant to a
series of tender offers (the "XxXxxxxx Tender Offers"). At the time, XxXxxxxx
was affiliated with the General Partner but was not an affiliate of the
Purchaser, IPT or Insignia. As a result of litigation instituted in connection
with the XxXxxxxx Tender Offers, in March 1995 the General Partner (and
certain of its affiliates at the time) entered into an Amended Stipulation of
Settlement (the "Stipulation") which, among other things, (i) requires the
General Partner to prohibit the Partnership from entering into a "roll-up"
transaction involving the General Partner or any of its affiliates prior to
January 1, 2000 unless such "roll-up" transaction is approved by Limited
Partners holding at least a majority of the outstanding Units owned by persons
who are unaffiliated with the General Partner, and (ii) prohibited XxXxxxxx
and its affiliates from initiating or participating in any tender offer for
Units for a period of 24 months following the completion of the XxXxxxxx
Tender Offers (which period has now expired). In January 1996, in connection
with the transactions described in the preceding paragraph, Insignia NPI
L.L.C. ("Insignia NPI"), which at the time was a wholly-owned subsidiary of
Insignia, acquired from XxXxxxxx all of the Units it acquired pursuant to the
XxXxxxxx Tender Offers. In December 1996, in connection with the formation of
IPT, Insignia NPI was merged with and into IPLP. As a result, IPLP now owns
all of those Units.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and its other affiliates, including among other things:
(i) the Limited Partnership Agreement, as amended to date; (ii) the
Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1996 and the Partnership's Quarterly Report on Form 10-QSB for the nine-month
period ended September 30, 1997; (iii) unaudited results of operations of the
Partnership's properties for the period since the beginning of the
Partnership's current fiscal year; (iv) the operating budgets prepared by
NPI-AP with respect to the Partnership's properties for the year ending
December 31, 1997; (v) an independent appraisal of one of the
22
Partnership's properties; and (vi) other information obtained by NPI-AP,
Insignia and other affiliates in their capacities as providers of property
management, asset management and partnership administration services to the
Partnership. Based on that information, the Purchaser (which is an affiliate
of the General Partner) considered several factors, as discussed below.
Trading History of Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the General Partner, from October 1,
1995 to September 30, 1997 an aggregate of 1,269 Units (representing less than
1.7% of the total outstanding Units) were transferred (excluding the Units
acquired by Insignia from XxXxxxxx in January 1996 and the transfers to IPLP
in December 1996 in connection with the formation of IPT). Set forth in the
table below are the high and low sales prices of Units for the quarterly
periods from October 1, 1995 to September 30, 1997, as reported by the General
Partner and by The Partnership Spectrum, which is an independent, third-party
source. The General Partner did not begin requesting price-related information
in connection with processing transfers of Units until January 1997.
Accordingly, price-related information for periods prior to January 1997 is
not presented under the column captioned "As Reported by the General Partner"
in the table below. The gross sales prices reported by The Partnership
Spectrum do not necessarily reflect the net sales proceeds received by sellers
of Units, which typically are reduced by commissions and other secondary
market transaction costs to amounts less than the reported prices; thus the
Purchaser does not know whether the information compiled by The Partnership
Spectrum is accurate or complete. The transfer paperwork submitted to the
General Partner often does not include the requested price information or
contains conflicting information as to the actual sales price; accordingly,
Limited Partners should not rely upon this information as being completely
accurate.
CENTURY PROPERTIES FUND XVIII
REPORTED SALES PRICES OF PARTNERSHIP UNITS
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(A) THE PARTNERSHIP SPECTRUM(B)
-------------------------- ---------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
-------- -------- -------- --------
Fiscal Year Ended December 31, 1997:
Third Quarter..................................... $49 $53 $56 $59
Second Quarter.................................... 31 49 49 49
First Quarter .................................... 26 46 39 50
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... n/a n/a 20 36
Third Quarter..................................... n/a n/a 29 34
Second Quarter.................................... n/a n/a 23 23
First Quarter..................................... n/a n/a 11 15
Fiscal Year Ended December 31, 1995:
Fourth Quarter.................................... n/a n/a 10 10
(a) Although the General Partner requests and records information on the
prices at which Units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The General Partner processes transfers of Units only 12
times per year - on the first day of each month. The prices in the table
are based solely on information provided to the General Partner by
sellers and buyers of Units transferred in sale transactions (i.e.,
excluding transactions believed to result from the death of a Limited
Partner, rollover to an IRA account, establishment of a trust, trustee to
trustee transfers, termination of a benefit plan, distributions from a
qualified or non-qualified plan, uniform gifts, abandonment of Units or
similar nonsale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The Purchaser
(which is an affiliate of the General Partner) does not know whether the
information compiled by The Partnership Spectrum is accurate or complete.
The Purchaser (which is an affiliate of the General Partner) believes
that, although secondary market sales information probably is not a reliable
measure of value because of the limited and inefficient nature of the market
for Units, this information may be relevant to a Limited Partner's decision as
to whether to tender its Units pursuant
23
to the Offer. At present, privately negotiated sales and sales through
intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of Units) are
the only means available to a Limited Partner to liquidate an investment in
Units (other than the Offer) because the Units are not listed or traded on any
exchange or quoted on NASDAQ.
Limited Partners' Interest in Cash From Operations. As described in
Section 10, pursuant to the Limited Partnership Agreement, the General Partner
is entitled to receive a partnership management fee equal to 9% of the
Partnership's adjusted cash from operations (which fee is payable as and when
cash from operations is distributed to Limited Partners). This effectively
means that the Limited Partners, in the aggregate, have only a 90% "operating"
interest in the Partnership (i.e., interest in operating cash flow), as
opposed to their 99% "liquidation" interest in the Partnership (i.e., interest
in proceeds from sales and refinancings of Partnership properties).
Accordingly, the Purchaser believes that the current fair value of a Unit is
significantly less than the net asset and liquidation value estimates
described below, and took this into account in determining the Purchase Price.
Appraisals. The Partnership's Oak Run Apartments complex was
appraised in July 1997 by an independent, third party appraiser, Xxxxxxx Tener
Real Estate Services, Inc. ("KTR"), in connection with a refinancing of that
property. According to the appraisal report, the scope of the appraisal
included an inspection of the property and an analysis of the surrounding
market. KTR relied principally on the income capitalization approach to
valuation and secondarily on the sales comparison approach, and represented
that its report was prepared in accordance with the Code of Professional
Ethics and Standards of Professional Appraisal Practice of the Appraisal
Institute and the Uniform Standards of Professional Appraisal Practice, and in
compliance with the Appraisal Standards set forth in the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (known as "FIRREA").
The estimated market value of the fee simple estate of the property specified
in that appraisal report was $15,100,000. A copy of the summary of the
appraisal has been filed as an exhibit to the Purchaser's Tender Offer
Statement on Schedule 14D-1 filed with the Commission.
IPT Formation Values. In connection with the formation of IPT,
Insignia prepared estimates of the values of the Partnership's properties and
of a Unit as of December 31, 1996 for purposes of determining the number of
units of limited partnership interest in IPLP it would receive in exchange for
the Units contributed to IPLP by Insignia and its affiliates. For this
purpose, Insignia estimated the aggregate value of the Partnership's
properties to be $25,033,052 and the net asset value of a Unit to be $100.
This aggregate property value is approximately $2,400,000 (or 8.7%) less than
the Gross Real Estate Value Estimate described below, principally due to
changes in the operating performances of the properties between December 1996
and October 1997; and this Unit value estimate is $21 (or 17%) less than the
Estimated Liquidation Value of a Unit described below, principally due to two
factors: (i) changes in the Partnership's net current assets between December
1996 and September 1997, and (ii) the increase in the value of the
Partnership's properties as described above.
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties, the Purchaser
utilized the capitalization of income approach. The estimate of the gross real
estate value of the Partnership's properties prepared by the Purchaser does
not purport to be an estimate of the aggregate fair market value of the Units
themselves, nor should it be viewed as such by Limited Partners. Neither the
Purchaser nor any of its affiliates prepared any estimates of the values of
the Partnership's properties based upon any other valuation method.
The following is a description of the methodology employed by the
Purchaser in preparing such estimates (as used below, "net operating income"
is calculated before depreciation, amortization, debt service payments and
certain capital expenditure items):
OVERLOOK APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($1,778,369) generated by the property for the
ten months ended October 31, 1997 (comprised of $1,660,863 of gross rental
income and $117,506 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($678,874), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($1,099,495). The Purchaser then annualized this
amount, resulting in
24
estimated annual net operating income of $1,319,394, and then reduced that
annualized net operating income amount by $300 per apartment unit,
representing the Purchaser's estimate of the adjustment that would be imputed
by a third party purchaser in underwriting the operating expenses, including
normal replacement reserves, of the property for valuation purposes. Finally,
the Purchaser capitalized its estimated adjusted net operating income amount
($1,228,194) at a 9.5% capitalization rate, resulting in an estimated gross
property value of $12,928,358.
OAK RUN APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($2,245,758) generated by the property for the
ten months ended October 31, 1997 (comprised of $2,148,200 of gross rental
income and $97,558 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($956,206), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($1,289,552). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,547,462, and
then reduced that amount by $400 per apartment unit, representing the
Purchaser's estimate of the adjustment that would be imputed by a third party
purchaser in underwriting the operating expenses, including normal replacement
reserves, of the property for valuation purposes. Finally, the Purchaser
capitalized its estimated adjusted net operating income amount ($1,379,462) at
a 9.5% capitalization rate, resulting in an estimated gross property value of
$14,520,653.
Based on the individual estimates of the gross values of the
Partnership's properties described above, the Purchaser estimated that the
current aggregate gross real estate value of the Partnership's properties is
$27,449,011 (the "Gross Real Estate Value Estimate"). The property-specific
capitalization rates used by the Purchaser in the valuation estimates
described above were based upon the Purchaser's, IPT's and Insignia's general
knowledge of the revenues and expenses associated with operating multi-family
properties in the markets in which the Partnership's properties are located,
their general knowledge of property values in those markets and their
experience in the real estate market in general.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that this approach represents
a reasonable method of estimating the aggregate gross value of the
Partnership's properties (without taking into account the costs of disposing
of the properties), subject to the substantial uncertainties inherent in any
estimate of value. The use of other assumptions, however, particularly as to
the applicable capitalization rate, could produce substantially different
results. None of the Purchaser, IPT or Insignia solicited any offers or
inquiries from prospective buyers of the Partnership's properties in
connection with preparing the Purchaser's estimates of the fair market values
of those properties, and the actual amounts for which the Partnership's
properties might be sold could be significantly higher or significantly lower
than the Purchaser's estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the debt encumbering the Partnership's properties or the other liabilities of
the Partnership, (ii) cash and other assets held by the Partnership, (iii)
real estate transaction costs that would be incurred on a sale of the
Partnership's properties, such as brokerage commissions and other selling and
closing expenses, (iv) timing considerations or (v) costs associated with
winding up the Partnership. For this reason, the Purchaser considers the Gross
Real Estate Value Estimate to be less meaningful in evaluating the Purchase
Price offered by the Purchaser than its pro forma estimate of the net
liquidation value per Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, which are a relatively illiquid
investment, and is not offering to purchase the Partnership's underlying
assets or assume any of its liabilities. Consequently, the Purchaser does not
believe that the per-Unit amount which might be distributed to Limited
Partners following a future sale of all the Partnership's properties
necessarily reflects the present fair value of a Unit. Conversely, the
realizable value of the Partnership's assets clearly is a relevant factor in
determining the price a prudent purchaser would offer for Units. In
considering this factor, the Purchaser made a pro forma calculation of the
amount each Limited Partner might receive in a theoretical orderly liquidation
of the Partnership (which may not be realistically possible, particularly in
the near term, due to real estate market conditions, the general difficulty of
disposing of real estate in a short period of time, and other general economic
factors), based on the Gross Real Estate Value Estimate described above and
the other considerations described
25
below. The Purchaser based its pro forma liquidation analysis on the Gross
Real Estate Value Estimate (and thus on the Purchaser's estimates of the
values of the Partnership's properties described above), as opposed to the
appraised values of the Partnership's properties or the values estimated in
connection with the formation of IPT (as described above), because the
Purchaser believes that the Gross Real Estate Value Estimate represents the
best estimate, based on currently available information, of the values of the
Partnership's properties.
In estimating the pro forma net liquidation value per Unit, the
Purchaser adjusted its Gross Real Estate Value Estimate of $27,449,011 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses). Specifically, the Purchaser added the amounts of cash,
accounts receivable and escrow deposits shown on the Partnership's unaudited
balance sheet at September 30, 1997 ($2,462,000), and subtracted the aggregate
amount of the distributions made by the Partnership to the Limited Partners
and the General Partner subsequent to September 30, 1997 ($650,000), the
mortgage debt encumbering the Partnership's properties ($18,588,000) and all
other liabilities shown on that balance sheet ($421,000). The Purchaser then
deducted from that amount $1,097,960, representing a reserve equal to 4% of
the Gross Real Estate Value Estimate (which represents the Purchaser's
estimate of the probable costs of brokerage commissions, real estate transfer
taxes and other disposition expenses). The result, $9,154,051, represents the
Purchaser's pro forma estimate of the aggregate net liquidation proceeds
(before provision for the costs described in the following sentence) which
could be realized on an orderly liquidation of the Limited Partnership, based
on the assumptions implicit in the calculations described above. The Purchaser
did not, however, deduct any amounts in respect of the legal and other costs
which the Purchaser expects would be incurred in a liquidation, including
costs of negotiating purchase and sale contracts, possibly conducting a
consent solicitation in order to obtain the Limited Partners' approvals for
the sales as may be required by the Limited Partnership Agreement, and winding
up the Partnership, because of the difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser then
deducted 1%, which is the percentage allocable to the General Partner in
respect of its non-subordinated interest in the Partnership, and the remaining
$9,062,510 was then divided by the 75,000 Units reported as outstanding by the
General Partner as of December 1, 1997. The resulting estimated pro forma
liquidation value was $120.83 per Unit (the "Estimated Liquidation Value"),
before provision for the legal and other costs of liquidating the Partnership
described in the last sentence of the preceding paragraph.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Units because
(i) there is no assurance that any such liquidation in fact will occur in the
foreseeable future and (ii) any liquidation in which the estimated fair market
values described above might be realized would take an extended period of time
(at least a year, and quite possibly significantly longer), during which time
the Partnership and its partners would continue to be exposed to the risk of
fluctuations in asset values because of changing market conditions and other
factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Units is substantially less than its estimate of the Estimated Liquidation
Value. Conversely, there is a substantial possibility that the per-Unit value
realized in an orderly liquidation could be greater than the Estimated
Liquidation Value. A reduction in either operating expenses or capital
expenditures from the levels reflected in the property operating statements
for the ten months ending October 31, 1997 would result in a higher
liquidation value under the method described above. Similarly, a higher
liquidation value would result if a buyer applied lower capitalization rates
(reflecting a willingness to accept a lower rate of return on its investment)
to the applicable net operating income generated by the Partnership's
properties than the capitalization rates applied by the Purchaser. For
example, a 5% increase or decrease in the value of the Partnership's
properties would produce a corresponding increase or decrease in the Estimated
Liquidation Value of approximately $17 per Unit. Furthermore, the analysis
described above is based on a series of assumptions, some of which may not be
correct. Accordingly, this analysis should be viewed merely as indicative of
the Purchaser's approach to valuing Units and not as any way predictive of the
likely result of any future transactions.
26
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term
of the Offer, the Purchaser (which is an affiliate of the General Partner)
will not be required to accept for payment or to pay for any Units tendered if
all authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, necessary for the consummation of the
transactions contemplated by the Offer shall not have been filed, occurred or
been obtained prior to the Expiration Date. Furthermore, notwithstanding any
other term of the Offer and in addition to the Purchaser's right to withdraw
the Offer at any time before the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) will not be required to accept for payment
or pay for any Units not theretofore accepted for payment or paid for and may
terminate or amend the Offer as to such Units if, at any time on or after the
date of the Offer and before the Expiration Date, any of the following
conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the
Offer or the acceptance for payment, purchase of or payment for any Units by
the Purchaser (which is an affiliate of the General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units, including without limitation the right
to vote any Units acquired by the Purchaser pursuant to the Offer or otherwise
on all matters properly presented to the Partnership's Limited Partners, (iii)
requires divestiture by the Purchaser of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as a result of the
transactions contemplated by the Offer, or (v) might materially adversely
affect the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Purchaser or the
Partnership;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) any limitation by any governmental
authority on, or other event which might affect, the extension of credit by
lending institutions or result in any imposition of currency controls in the
United States, (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the United
States, (v) a material change in United States or other currency exchange
rates or a suspension of, or imposition of a limitation on, the markets
thereof, or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof;
or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i)
more than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act), or (ii) any person or group that prior to such
date had filed a Statement with the Commission pursuant to Section 13(d) or
(g) of the Exchange Act has increased or proposes to increase the number of
Units beneficially owned by such person or group as disclosed in such
Statement by two percent or more of the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or
may
27
be waived by the Purchaser in whole or in part at any time and from time to
time in its sole discretion. Any determination by the Purchaser (which is an
affiliate of the General Partner) concerning the events described above will
be final and binding upon all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser (which is an affiliate of the General Partner)
is not aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Units by the Purchaser (which is an affiliate of the
General Partner) pursuant to the Offer, other than the filing of a Tender
Offer Statement on Schedule 14D-1 with the Commission (which has already been
filed) and any required amendments thereto. Should any such approval or other
action be required, it is the Purchaser's present intention that such
additional approval or action would be sought. Although there is no present
intent to delay the purchase of Units tendered pursuant to the Offer pending
receipt of any such additional approval or the taking of any such action,
there can be no assurance that any such additional approval or action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Partnership's business, or that certain
parts of the Partnership's business might not have to be disposed of or other
substantial conditions complied with in order to obtain such approval or
action, any of which could cause the Purchaser (which is an affiliate of the
General Partner) to elect to terminate the Offer without purchasing Units
thereunder.
Antitrust. The Purchaser (which is an affiliate of the General
Partner) does not believe that the Xxxx-ScottRodino Antitrust Improvements Act
of 1976, as amended, is applicable to the acquisition of Units contemplated by
the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section
16, the Purchaser (which is an affiliate of the General Partner) will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Units pursuant to the Offer. The Purchaser (which is an affiliate
of the General Partner) has retained Beacon Hill Partners, Inc. to act as
Information Agent and Xxxxxx Trust Company of New York to act as Depositary in
connection with the Offer. The Purchaser (which is an affiliate of the General
Partner) will pay the Information Agent and the Depositary reasonable and
customary compensation for their respective services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and has agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection therewith, including liabilities under the federal
securities laws. The Purchaser (which is an affiliate of the General Partner)
will also pay all costs and expenses of printing and mailing the Offer and its
legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser (which is an affiliate of
the General Partner) is not aware of any jurisdiction in which the making of
the Offer is not in compliance with applicable law. If the Purchaser (which is
an affiliate of the General Partner) becomes aware of any jurisdiction in
which the making of the Offer would not be in compliance with applicable law,
the Purchaser will make a good faith effort to comply with any such law. If,
after such good faith effort, the Purchaser (which is an affiliate of the
General Partner) cannot comply with any such law, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) Limited Partners
residing in such jurisdiction. In those jurisdictions whose securities or blue
sky laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on behalf of the Purchaser (which is an
affiliate of the General Partner) by one or more registered brokers or dealers
licensed under the laws of that jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the
General Partner) not contained in this Offer to Purchase or in the Assignment
of Partnership Interest and, if given or made, such information or
representation must not be relied upon as having been authorized.
28
The Purchaser (which is an affiliate of the General Partner), IPLP,
IPT and Insignia have filed with the Commission a Tender Offer Statement on
Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same places and
in the same manner as set forth in Section 9 (except that they will not be
available at the regional offices of the Commission).
MADISON RIVER PROPERTIES, L.L.C.
DECEMBER 17, 1997
29
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SCHEDULE I
TRANSACTIONS IN THE UNITS
EFFECTED BY IPLP WITHIN THE PAST 60 DAYS
Number of Price
DATE Units Purchased Per Unit
---- --------------- --------
10/16/97 20 55.00
10/16/97 25 53.00
10/24/97 5 49.00
11/25/97 8 36.50
S-1
SCHEDULE II
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the managers of the
Purchaser. Each person identified below is employed by Xxxxxxxx and is a
United States citizen. The principal business address of the Purchaser and,
unless otherwise indicated, the business address of each person identified
below, is One Insignia Financial Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has been a Manager of the
000 Xxxx Xxxxxx Purchaser since its inception in December
Suite 3401 1997. For additional information regarding
New York, NY 10152 Xx. Xxxxx, see Schedule III.
Xxxx X. Xxxxx Xxxx X. Xxxxx has been a Manager of the
Purchaser since its inception in December
1997. For additional information regarding
Mr. Xxxxx, see Schedules III and IV.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has been a Manager of the
Purchaser since its inception in December
1997. For additional information regarding
Xx. Xxxxxx, see Schedules III and IV.
S-2
SCHEDULE III
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the trustees and
executive officers of IPT. Each person identified below is employed by
Xxxxxxxx and is a United States citizen. The principal business address of IPT
and, unless otherwise indicated, the business address of each person
identified below, is One Insignia Financial Plaza, Greenville, South Carolina
29602. Trustees are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has served as a Trustee of
IPT since December 1996, and has served as
Chairman of the Board of Trustees and Chief
Executive Officer of IPT since January 1997.
For additional information regarding Xx.
Xxxxxx, see Schedule IV.
Xxxxx X. Xxxxx* Xxxxx X. Xxxxx has served as a Trustee and
President of IPT since its inception in May
1996. For additional information regarding
Xx. Xxxxx, see Schedule IV.
Xxxxx X. Xxxxxxxx* Xxxxx X. Xxxxxxxx has served as a Trustee
000 Xxxxxxxx Xxxxxxxxx of IPT since December 1996. Xx. Xxxxxxxx
Suite 400 also served as an Executive Managing Director
Nashville, TN 37205 of IPT from January 1997 to April 1997.
For additional information regarding Xx.
Xxxxxxxx, see Schedule IV.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as a Senior Vice
000 Xxxx Xxxxxx President of IPT since August 1997, and
Suite 3401 served as a Vice President of IPT from June
New York, NY 10152 1997 until August 1997. Since April 1997,
Xx. Xxxxx'x principal occupation has been to
serve as a Senior Vice President --
Investment Banking of Insignia. Prior to
April 1997, Xx. Xxxxx'x principal occupation
was as an attorney with the law firm of
Xxxxxx & Xxxxx, New York, New York.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as the
Controller of IPT since August 1997. Since
April 1995, Mr. Xxxxx' principal occupation
has been to serve as an accountant with
Insignia. Prior to April 1995, Mr. Xxxxx'
principal occupation was as a senior auditor
with the accounting firm of Ernst & Young
LLP.
Xxxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxxx, Xx. has served as a
Senior Vice President of IPT since August
1997, and served as Vice President and
Director of Operations of IPT from December
1996 until August 1997. Xx. Xxxxxxx'x
principal employment has been with Insignia
for more than the past five years. From
January 1994 to September 1997, Xx. Xxxxxxx
served as Managing Director-- Partnership
Administration of Insignia.
S-3
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx X. Xxxxx Xxxx X. Xxxxx has served as Secretary of IPT
since December 1996, and has served as a
Senior Vice President of IPT since August
1997. Mr. Xxxxx served as a Vice President
IPT from May 1996 until August 1997. For
additional information regarding Mr. Xxxxx,
see Schedule IV.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has served as Treasurer of IPT
since December 1996, and has served as a
Senior Vice President of IPT since August
1997. Xx. Xxxxxx served as a Vice President
of IPT from December 1996 until August 1997
and as Chief Financial Officer of IPT from
May 1996 until December 1996. For additional
information regarding Xx. Xxxxxx, see
Schedule IV.
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has served as Chief
Operating Officer of IPT since May 1997.
Since August 1994, Xx. Xxxxxx'x principal
occupation has been to serve as President of
the various corporate general partners of
partnerships controlled by Metropolitan
Asset Enhancement, L.P., which is an
affiliate of Insignia.
S-4
SCHEDULE IV
INFORMATION REGARDING THE
DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Insignia. Unless otherwise indicated, each person
identified below is employed by Insignia and is a United States citizen. The
principal business address of Insignia and, unless otherwise indicated, the
business address of each person identified below, is One Insignia Financial
Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000. Directors are identified by an
asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has been a Director and
Chairman, President and Chief Executive
Officer of Insignia since its inception in
January 1991. Xx. Xxxxxx has also been
President of Metropolitan Asset Group, Ltd.
("MAG"), a real estate investment banking
firm, since 1983.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of
0000 Xxxxx Xxxxxx Xxxxx Insignia since May 1996. For more than the
Santa Fe, NM 87501 past five years, Xx.Xxxxxxx'x principal
occupation has been as a General Partner of
First Security Company II, L.P., an
investment advisory firm.
Xxxxx X. Xxxxxx* Xxxxx X. Xxxxxx has been a Director of
000 Xxxx Xxxxxx Insignia since August 1993. Xx. Xxxxxx is
New York, NY 10021 the retired Chairman of the Board and Chief
Executive Officer of Alexander's Inc., a
real estate company. He also serves as a
director of Refac Technology Development
Corporation, Noodle Kiddoodle, and
Containerways International Ltd.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of
000 Xxxxxxx Xxxxxx Insignia since August 1993. For more than
New York, NY 10022 the past five years, Xx. Xxxxxxx'x principal
occupation has been as Chairman of the Board
of Directors and Co-Chief Executive Officer
of Charterhouse Group International, Inc., a
privately-owned investment firm which, among
other things, actively engages in making
private equity investments in a broad range
of industrial and service companies located
primarily in the United States. Xx. Xxxxxxx
is also a director of American Disposal
Services, Inc., Designer Holdings Ltd. and
Microwave Power Devices, Inc.
Xxxxxx X. Xxxx* Xxxxxx X. Xxxx has been a Director of
000 Xxxx 00xx Xxxxxx Insignia since August 1993. Since February
New York, NY 10019 1996, Xx. Xxxx has been a partner in the law
firm of Akin, Gump, Strauss, Xxxxx & Xxxx,
which represents Insignia and certain of its
affiliates from time to time. From January
1991 to February 1996, Xx. Xxxx was a
partner in the law firm LeBoeuf, Lamb,
Xxxxxx & XxxXxx.
Xxxxxxx X. Xxxxxxxx* Xxxxxxx X. Xxxxxxxx has been a Director of
000 Xxxx 00xx Xxxxxx Insignia since August 1993. For more than the
New York, NY 10022 past five years, Xx. Xxxxxxxx'x principal
occupation has been as a self-employed
consultant in the real estate business,
including ownership, management and lending.
S-5
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx Xxxxxx* Xxxx Xxxxxx has been a Director of Insignia
000 X. Xxxx Xxxxxx since August 1993. For more than the past
Greenville, SC 29601 five years, Xx. Xxxxxx'x principal occupation
has been to serve as Chairman of the Board
and Chief Executive Officer of RSI Holdings,
a company which distributes outdoor
equipment. Xx. Xxxxxx is also a director of
Fluor Corporation, The Liberty Corporation,
NationsBank Corporation, Emergent Group,
Inc., Delta Woodside Industries, Inc., Duke
Power Company, and Textile Hall Corporation.
Xxxxx X. Aston Xxxxx X. Aston's principal employment has
been with Insignia for more than the past
five years. Xx. Xxxxx currently serves as
Chief Financial Officer of Insignia (since
August 1996) and with the Office of the
Chairman (since July 1994).
Xxxxxx X. Xxxxxx Xxxxxx Xxxxxx has been a Senior Vice
President -- Human Resources of Insignia
since August 1997. Prior to August 1997, Xx.
Xxxxxx'x principal employment for more than
the prior five years was as Director --
Human Resources of E&Y Xxxxxxx Xxxxxxxxx
Real Estate Group, New York, New York.
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx'x principal employment has
000 Xxxxxxxx Xxxxxxxxx been with Insignia for more than the past
Suite 400 five years. Xx. Xxxxxxxx currently serves
Nashville, TN 37205 as an Executive Managing Director of Insignia
(since July 1994) and as President of
Insignia Financial Services, a division of
Insignia (since July 1994).
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx'x principal employment
000 Xxxx Xxxxxx has been with Insignia for more than the past
Suite 3401 five years. Xx. Xxxxxxxx currently serves
New York, NY 10152 as a Managing Director -- Investment Banking
of Insignia (since July 1994).
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx has been with the Office of
000 Xxxx Xxxxxx the Chairman of Insignia since July 1996.
New York, NY 10166 Prior to July 1996, Xx. Xxxxxx'x principal
employment for more than the prior five
years was as a founder and Chairman of
Xxxxxx X. Xxxxxx Company, Incorporated
("ESG"), a commercial property management
and brokerage firm located in New York, New
York that was acquired by Insignia in June
1996.
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx'x principal employment has
been with Insignia for more than the past
five years. Xx. Xxxxxxx currently serves as
a Senior Vice President of Insignia (since
July 1994) and as Chief Information Officer
of Insignia (since January 1991).
Xxxxx Xxxxxxxx Xxxxx Xxxxxxxx'x principal employment has
been with Insignia since January 1993. Xx.
Xxxxxxxx currently serves as an Executive
Managing Director of Insignia (since June
1994) and Chief Operating Officer of
Insignia Commercial Group (since January
1997). From January 1987 to January 1993,
Xx. Xxxxxxxx'x principal employment was as
Chief Executive Officer of First Resource
Realty, Inc., a commercial property
management organization located in Oklahoma
that Insignia acquired in January 1993.
S-6
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx Xxxxxxx Xxxx Xxxxxxx has been an Executive Managing
000 Xxxxx Xxxxxx Director of Insignia since September 1995
New York, NY 10022 and President of Insignia Residential Group
since September 1997. Prior to September
1995, Xx. Xxxxxxx'x principal occupation was
to serve as President and Chief Executive
Officer of Xxxxxxx Company, Inc., a
residential property management firm located
in New York, New York which Insignia
acquired in September 1995.
Xxxx X. Xxxxx Xxxx X. Xxxxx has been General Counsel of
Insignia since June 1994 and Secretary since
July 1994. From May 1993 until June 1994,
Mr. Xxxxx' principal employment was as
Assistant General Counsel and Vice President
of Ocwen Financial Corporation, a thrift
holding company located in West Palm Beach,
Florida. From October 1991 until April 1993,
Mr. Xxxxx' principal employment was as
Senior Attorney of Banc One Corporation, a
bank holding company in Columbus, Ohio.
Xxxxxx Xxxx Xxxxxx Xxxx has been a Senior Vice President
-- Finance of Insignia since January 1997
and Controller of Insignia since June 1994.
Prior to June 1994, Xx. Xxxx was Senior Vice
President and Controller of The First
Savings Bank located in Greenville, South
Carolina.
Xxxxx Xxxxxx Xxxxxxxxx Xxxxx Xxxxxx Xxxxxxxxx has been Managing
000 Xxxx Xxxxxx Director and Chief Strategic Officer for
New York, NY 10152 European Operations of Insignia since June
1997. From November 1993 until June 1997,
Xx. Xxxxxxxxx'x principal employment was as
Manager of YPF, a petroleum company located
in Buenos Aires, Argentina. From May 1991
until October 1993, Xx. Xxxxxxxxx'x
principal employment was as a partner of
MCA, an advisory company in Madrid, Spain.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx'x principal employment has
been with Insignia for more than the past
five years. Xx. Xxxxxx currently serves as
Chief Operating Officer of Insignia
Residential Group (since January 1997).
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has been an Executive
000 Xxxx Xxxxxx Managing Director of Insignia since July 1996
New York, NY 10166 and President of Insignia Commercial Group
since January 1997. From February 1992 until
July 1996, Xx. Xxxxxx'x principal employment
was as President of ESG.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx'x principal employment has
been with Insignia for more than the past
five years. Xx. Xxxxxx currently serves as
Chief Operating Officer (since August 1996)
and Treasurer (since January 1992) of
Insignia.
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx'x principal employment has
6000 Rockside Xxxxx been with Realty One, Inc., a wholly-owned
Blvd. subsidiary of Insignia ("Realty One"), for
Cleveland, OH 44131 more than the past five years. Xx. Xxxxx
currently serves as a Director and Chief
Executive Officer of Realty One (since
October 1997).
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx'x principal employment has
6000 Rockside Xxxxx been with Realty One for more than the past
Blvd. five years. Xx. Xxxxxxx currently serves
Cleveland, OH 44131 as Director, President, Chief Operating
Officer and Treasurer of Realty One (since
October 1997).
S-7
SCHEDULE V
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Fund XX
Century Properties Growth Fund XXII
Century Pension Income Fund XXIII
Century Pension Income Fund XXIV
Johnstown/Consolidated Income Partners
Davidson Growth Plus, L.P.
Multi-Benefit Realty Fund `87-1
U.S. Realty Partners, X.X.
Xxx Strategic Housing Income Partners
S-8
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Manually signed facsimile copies of the Assignment of Partnership
Interest will be accepted. The Assignment of Partnership Interest and any
other required documents should be sent or delivered by each Limited Partner
or such Limited Partner's broker, dealer, bank, trust company or other nominee
to the Depositary as set forth below.
The Depositary for the Offer is:
XXXXXX TRUST COMPANY OF NEW YORK
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (000) 000-0000 (212) 701-0000 Xxxx Xxxxxx Plaza
P.O. Box 0000 00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 Xxx Xxxx, Xxx Xxxx 00000
Questions and requests for assistance or for additional copies of
this Offer to Purchase and the Assignment of Partnership Interest may be
directed to the Information Agent at its telephone number and address listed
below. You may also contact your broker, dealer, bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
(Toll Free)
(000) 000-0000
(Call Collect)
