OFFER TO PURCHASE
UP TO 14,732
BENEFICIAL ASSIGNMENT CERTIFICATES
in
INDEPENDENCE TAX CREDIT PLUS X.X. XX
for
$725 NET PER BAC IN CASH
by
LEHIGH TAX CREDIT PARTNERS L.L.C.
--------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 10, 1997, UNLESS EXTENDED.
--------------------------------------------------------------------------------
Lehigh Tax Credit Partners L.L.C., a Delaware limited liability company
(the "Purchaser") and an affiliate of the general partner of the Partnership
(as defined below), hereby offers to purchase up to 14,732 of the issued and
outstanding Beneficial Assignment Certificates ("BACs") representing
assignments of limited partnership interests ("Limited Partnership Interests")
in Independence Tax Credit Plus X.X. XX, a Delaware limited partnership (the
"Partnership"), at a purchase price of $725 per BAC, net to the seller in cash
(the "Purchase Price"), without interest thereon, upon the terms and subject to
the conditions set forth in this Offer to Purchase (the "Offer to Purchase")
and in the related Letter of Transmittal, as each may be supplemented, modified
or amended from time to time (which together constitute the "Offer"). The
Purchase Price will be automatically reduced by $14 per BAC for each month (or
part of a month) between December 31, 1997 and the date of transfer for BACs
transferred after December 31, 1997. BACs HOLDERS WHO TENDER THEIR BACs WILL
NOT BE OBLIGATED TO PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES, WHICH
COMMISSIONS AND FEES WILL BE BORNE BY THE PURCHASER. The 14,732 BACs sought
pursuant to the Offer represent, to the best knowledge of the Purchaser,
approximately 25% of the BACs outstanding as of the date of this Offer.
------------------------
THE PURCHASER AND RELATED INDEPENDENCE ASSOCIATES L.P., THE GENERAL PARTNER
OF THE PARTNERSHIP, ARE AFFILIATED.
------------------------
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF BACs BEING
TENDERED. SEE SECTION 14 ("CONDITIONS OF THE OFFER").
------------------------
IN ORDER TO COMPLY WITH CERTAIN RESTRICTIONS SET FORTH IN THE PARTNERSHIP'S
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, TENDERS OF LESS THAN
ALL BACs OWNED BY A BACs HOLDER THAT WOULD RESULT IN A BACs HOLDER HOLDING
LESS THAN 5 BACs WILL NOT BE ACCEPTED.
------------------------
Before tendering, BACs holders are urged to consider the following factors:
[bullet] BACs holders who have a present or future need for the tax credits
and/or tax losses from the BACs may prefer to retain their BACs and
not tender them pursuant to the Offer, or any other tender offer.
[bullet] Although the Purchaser cannot predict the future value of the
Partnership's assets on a per BAC basis, the net after-tax benefit
that would be realized from retaining ownership of BACs together with
any cash distributions from operations and any net proceeds from a
future sale of the properties owned by the Local Partnerships in which
the Partnership has an interest (the "Properties") could be greater
than or less than the Purchase Price. See Section 13 ("Purchase Price
Considerations").
[bullet] If the Purchaser is successful in acquiring a significant number of
BACs pursuant to the Offer, the Purchaser could, subject to the
Standstill Agreement (as defined in the Glossary), be in a position to
significantly influence all Partnership decisions on which BACs
holders may vote, including decisions regarding removal of the General
Partner, certain amendments to the Partnership Agreement (as defined
in the Glossary) and dissolution of the Partnership.
[bullet] The Purchaser believes that the projected aggregate per BAC benefit of
the Offer, together with the benefits already received by a BACs
holder, compares favorably with the potential benefits the Purchaser
believes a BACs holder will receive if he or she remains in the
Partnership, together with the benefits already received by a BACs
holder. See Section 13 ("Purchase Price Considerations").
IMPORTANT
Any (i) BACs holder, (ii) beneficial owner, in the case of BACs owned by
Individual Retirement Accounts or Xxxxx Plans (a "Beneficial Owner"), or (iii)
person who has purchased BACs but has not yet been reflected on the
Partnership's books as a transferee of such BACs (an "Assignee"), desiring to
tender any or all of such person's BACs should either (1) complete and sign the
Letter of Transmittal, or a facsimile copy thereof, in accordance with the
instructions in the Letter of Transmittal and mail or deliver the Letter of
Transmittal, or a facsimile copy thereof, and any other required documents to
The Xxxxxx Group, Inc. (the "Information Agent/Depositary"), at the address or
facsimile number set forth below, or (2) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him or her. Unless the context requires otherwise, references to BACs holders
in this Offer to Purchase shall be deemed to also refer to Beneficial Owners
and Assignees. Questions or requests for assistance may be directed to the
Information Agent/Depositary at the address and telephone number set forth
below. Requests for additional copies of this Offer to Purchase, the Letter of
Transmittal and other related documents may be directed to the Information
Agent/Depositary.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER
THAN AS CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. NO SUCH
RECOMMENDATION, INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
EACH BACs HOLDER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO PURCHASE,
THE LETTER OF TRANSMITTAL AND RELATED DOCUMENTS.
For Additional Information Call:
The Xxxxxx Group, Inc.
0000 Xxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
ii
TABLE OF CONTENTS
Page
-----
INTRODUCTION .................................................................. 1
THE TENDER OFFER .................................................................. 4
1. Terms of the Offer ............................................. 4
2. Proration; Acceptance for Payment and Payment for BACs ............ 5
3. Procedures for Tendering BACs .................................... 6
4. Withdrawal Rights ................................................ 7
5. Extension of Tender Period; Termination; Amendment ............... 8
6. Certain Federal Income Tax Consequences ........................... 9
7. Effects of the Offer ............................................. 10
8. Purpose of the Offer; Future Plans .............................. 12
9. Certain Information Concerning the Partnership .................. 13
10. Certain Information Concerning the Purchaser ..................... 19
11. Background of the Offer .......................................... 20
12. Source of Funds ................................................... 21
13. Purchase Price Considerations .................................... 21
14. Conditions of the Offer .......................................... 23
15. Certain Legal Matters ............................................. 24
16. Certain Fees and Expenses ....................................... 25
17. Miscellaneous ................................................... 25
Appendix A. Glossary ......................................................... A-1
Schedule I. Information with respect to the executive officers and directors of
Lehigh Tax Credit Partners, Inc. ................................. S-1
Schedule II. Local Partnership Schedule ....................................... S-2
Schedule III. Certain Information Concerning the Properties ..................... S-3
iii
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To the Holders of Beneficial Assignment Certificates of Independence Tax Credit
Plus X.X. XX:
INTRODUCTION
Lehigh Tax Credit Partners L.L.C., a Delaware limited liability company
(the "Purchaser") and an affiliate of the general partner of the Partnership
(as defined below), hereby offers to purchase up to 14,732 of the issued and
outstanding Beneficial Assignment Certificates ("BACs") representing limited
partnership interests in Independence Tax Credit Plus X.X. XX, a Delaware
limited partnership (the "Partnership"), at a purchase price of $725 per BAC,
net to the seller in cash (the "Purchase Price"), without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase (the
"Offer to Purchase") and in the related Letter of Transmittal, as each may be
supplemented, modified or amended from time to time (which together constitute
the "Offer"). The Purchase Price will be automatically reduced by $14 per BAC
for each month (or part of a month) between December 31, 1997 and the date of
transfer for BACs transferred after December 31, 1997. BACs holders who tender
their BACs will not be obligated to pay any commissions or Partnership transfer
fees, which commissions and fees will be borne by the Purchaser. The 14,732
BACs sought pursuant to the Offer represent, to the best knowledge of the
Purchaser, approximately 25% of the BACs issued and outstanding as of the date
of this Offer.
The Purchaser is affiliated with Related Independence Associates L.P., the
general partner of the Partnership (the "General Partner"). In order to comply
with certain restrictions set forth in the Partnership's Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement"), tenders of less
than all BACs owned by a BACs holder that would result in a BACs holder holding
less than 5 BACs will not be accepted.
The Purchaser is making this Offer because it believes that the BACs
represent an attractive investment at the price offered based upon, in part,
the expected remaining Tax Credits and tax losses. There can be no assurance,
however, that the Purchaser's judgment is correct, and, as a result, ownership
of BACs (either by the Purchaser or BACs holders who retain their BACs) will
remain a speculative investment. The Purchaser is acquiring the BACs for
investment purposes and does not intend to make any effort to change current
management or the operations of the Partnership. Because the Purchaser is
affiliated with the General Partner, the Purchaser's acquisition of BACs may
have the effect of making any future change of current management more
difficult. The Purchaser has no current plans for any extraordinary transaction
involving the Partnership.
Factors to be considered by BACs holders. In considering the Offer, BACs
holders are urged to consider the following factors:
[bullet] BACs holders who have a present or future need for the Tax Credits
and/or tax losses from the BACs may prefer to retain their BACs and
not tender them pursuant to the Offer, or any other tender offer.
[bullet] Although the Purchaser cannot predict the future value of the
Partnership's assets on a per BAC basis, the net after-tax benefit
that would be realized from retaining ownership of the BACs together
with any cash distributions from operations and any net proceeds from
a future sale of the properties owned by the Local Partnerships in
which the Partnership has an interest (the "Properties") could be
greater than or less than the Purchase Price. See Section 13
("Purchase Price Considerations").
[bullet] There may be a conflict between the desire of the Purchaser to acquire
the BACs at a low price and the desire of the BACs holders to sell
their BACs at a high price. Therefore, BACs holders might receive
greater value if they hold their BACs, rather than tender, continue to
be allocated Tax Credits and tax losses, and receive any distributions
from operations and any proceeds, if any, from the liquidation of the
Partnership. Alternatively, BACs holders may prefer to receive the
Purchase Price now rather than wait to be allocated future Tax Credits
and tax losses and uncertain future cash distributions. The return to
BACs holders could be higher or lower than the Purchase Price for
persons who retain their BACs.
[bullet] BACs holders should note that the most recent trading activity in the
BACs occurred in March 1997. The selling price for BACs reported in
the limited and sporadic secondary market during the two-month period
ended March 31, 1997 was $860. See Section 13 ("Purchase Price
Considerations"). Such secondary market selling prices, however, do
not take into account commissions charged by secondary market makers
effectuating such sales which the Purchaser believes, based on a
typical 5 BAC sales transaction, range from 5% to 8.75% of the sales
price (which would result in a reduction of the net proceeds to the
seller of approximately $43 to approximately
$75.25 per BAC). Additionally, because the BACs are less valuable with
the passage of time since fewer Tax Credits remain, the Purchaser
believes the price per BAC should be reduced by at least $14 for each
passing month, or a total of approximately $112 per BAC from March 31,
1997 to November 30, 1997. Therefore, the Purchaser believes the value
of BACs in December (when the Offer expires), based upon the most
recently reported secondary market sales, net of sales commissions,
would be approximately $673 to $705 per BAC. The Purchase Price
represents a premium to this range of values.
[bullet] The Offer is being made in order to acquire BACs for investment
purposes. The Purchaser intends to sell, and has begun the process of
selling, membership interests in the Purchaser to third parties
(predominantly corporations) with a need for the Tax Credits and/or
tax losses attributable to the tendered BACs. The aggregate sales
price of the Purchaser's membership interests to third parties will be
equal to the aggregate purchase price for the tendered BACs and all
other securities acquired by the Purchaser pursuant to secondary
market transactions and other tender offers conducted to date,
together with the expenses associated therewith, the expenses
associated with the Purchaser's sale of membership interests and the
prepayment of certain fees and expenses in connection with the
Purchaser's operations. Neither the Purchaser nor its current members
will derive a profit from the sale of the Purchaser's membership
interests.
In connection with such sales and in consideration for structuring this
transaction and for certain services to be performed for the Purchaser,
however, it is expected that affiliates of the Purchaser will earn
fees. These fees will be, in part, dependent on the amount third
parties are willing to pay for membership interests and the amount of
membership interests sold. There can be no assurance, however, that any
membership interests in the Purchaser will be sold or at what price.
[bullet] If the Purchaser is successful in acquiring a significant number of
BACs pursuant to the Offer, the Purchaser could, subject to the
Standstill Agreement (as defined in the Glossary), be in a position to
significantly influence all Partnership decisions on which BACs
holders may vote. Additionally, because the Purchaser is affiliated
with the General Partner, the Purchaser's acquisition of BACs may have
the effect of making any future change of the Partnership's current
management more difficult. If the maximum number of BACs sought by the
Purchaser is tendered and accepted for payment pursuant to the Offer,
the Purchaser will own approximately 25% of the outstanding BACs.
After November 7, 2007 (the "Standstill Expiration Date"), the
ownership of tendered BACs by the Purchaser could effectively (i)
prevent non-tendering BACs holders from taking actions they desire but
that the Purchaser opposes and (ii) enable the Purchaser to take
actions desired by it but opposed by certain non-tendering BACs
holders. Under the Partnership Agreement, Limited Partners and BACs
holders holding more than 50% of aggregate Limited Partnership
Interests and BACs representing Limited Partnership Interests are
entitled, either directly or through the Assignor Limited Partner, as
the case may be, to take action with respect to a variety of matters,
including: approving the dissolution of the Partnership; approving the
removal of any General Partner and proposing and approving a
replacement therefor; approving or disapproving the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Partnership Agreement. Although the Purchaser does
not have any current intentions with regard to any of these matters,
it will, following the Standstill Expiration Date, vote the BACs
acquired pursuant to the Offer in its interest, which may, or may not,
be in the best interest of non-tendering BACs holders. Until the
Standstill Expiration Date, the Purchaser has agreed to vote its BACs
in the same manner as the majority of all voting BACs holders;
provided, however, the Purchaser shall be entitled to vote its BACs as
it determines with regard to any proposal (i) to remove the General
Partner or (ii) concerning the reduction of any fees, profits,
distributions or allocations for the benefit of the General Partner or
its affiliates.
[bullet] Most of the properties owned by the Local Partnerships in which the
Partnership has an interest began to qualify for Housing Tax Credits
in 1993 and 1994. Housing Tax Credits are generally available for 10
years. The amount of the Housing Tax Credits claimed by the
Partnership was $6,413,606 for the 1996 calendar year, $4,564,313 for
the 1995 calendar year, and $2,542,233 for the 1994 calendar year.
Although there can be no assurance as to whether Housing Tax Credits
will continue to be available, the Purchaser estimates that a total of
approximately $1,198 Housing Tax Credits per BAC will be available
during the period beginning December 16, 1997 and ending December 31,
2006. In addition, although there can be no assurance as to whether
tax losses will continue to be available, in calendar year 1996 each
BAC was allocated approximately $61 of tax losses and the Purchaser
estimates that each BAC will be allocated (a) approximately $1,256 of
tax losses per year through December 31, 2011, and (b) approximately
$536 of taxable income upon a liquidation of the Partnership, assum-
2
ing no cash distributions are made. Actual future tax benefits may
differ significantly from the foregoing estimates. Tax losses are less
valuable than tax credits because tax losses can reduce income (thereby
resulting in a savings equal to the product of the tax loss and the
taxpayer's applicable tax rate) and require a reduction in tax basis
(which may cause taxable income to be recognized in subsequent years),
whereas tax credits result in a dollar-for-dollar reduction in tax
liability. BACs holders should consider whether the benefits of the
Offer, including the Purchase Price, are more valuable to them than the
present value of anticipated future tax benefits. See Section 13
("Purchase Price Considerations").
BACs holders may no longer wish to continue with their investment in the
Partnership for a number of reasons, including:
[bullet] Although there are some limited resale mechanisms available to the
BACs holders wishing to sell their BACs, there is no formal or
organized trading market for the BACs. The Partnership's Form 10-K for
the fiscal year ended March 31, 1997 (the "Form 10-K") states:
"Neither the BACs nor the Limited Partnership Interests are traded on
any established trading market. The Partnership does not intend to
include the BACs for quotation on NASDAQ or for listing on any
national or regional stock exchange or any other established
securities market." Accordingly, BACs holders who desire resale
liquidity may wish to consider the Offer. The Offer affords a
significant number of BACs holders with an opportunity to dispose of
their BACs for cash, which alternative otherwise might not be
available to them. The Purchase Price is not intended to represent
either the fair market value of a BAC or the fair market value of the
Tax Credits and tax losses attributable to each BAC and the
Partnership's assets on a per BAC basis.
[bullet] The Offer will provide BACs holders with an immediate opportunity to
liquidate their investment in the Partnership without the usual
transaction costs associated with market sales or partnership transfer
fees.
[bullet] The Purchaser believes that the projected aggregate per BAC benefit
from the Offer, together with the benefits received since 1993, total
approximately $1,603. Such benefits include $725 (the Purchase Price)
plus $393 (representing the Tax Credits allocated through December 15,
1997) plus approximately $81 (representing the tax savings, assuming a
tax rate of 20% for capital gain and 36% for ordinary income,
attributable to the use of a capital loss of $15 and an ordinary loss
of $225 the Purchaser believes an individual BACs holder will realize
if all of his BACs are sold in the Offer and the individual has not
previously used such losses to offset passive income) plus
approximately $426 (representing the assumed return on the
reinvestment of the Purchase Price at 5.75% for approximately 12
years, discounted at a rate of 9%) less approximately $22
(representing a recapture of Historic Tax Credits). See Section 13
("Purchase Price Considerations"). The Purchaser believes that such
aggregate projected benefit compares favorably with the potential
benefits to a BACs holder who remains in the Partnership (together
with the benefits received since 1993), continuing to receive Tax
Credits, and assuming a return of the present value of the original
investment of $1,000 as, and if, the 15 properties owned by the Local
Partnerships in which the Partnership has an interest are sold for
amounts in excess of the then existing indebtedness and other
liabilities. The aggregate of such potential benefits (including Tax
Credits allocated through December 15, 1997) is estimated by the
Purchaser to be approximately $1,587. BACs HOLDERS SHOULD CONSULT WITH
THEIR RESPECTIVE TAX AND OTHER ADVISORS REGARDING THE CONSEQUENCES OF
THE OFFER TO THEM.
[bullet] The Offer may be attractive for BACs holders whose circumstances have
changed such that anticipated future allocation of Tax Credits and tax
losses may no longer be beneficial to them.
[bullet] Acceptance of the Offer will eliminate any future risk to the selling
BACs holder of recapture of the Tax Credits received, since such risk
will be borne by the Purchaser. The Purchaser believes, however, that
any risk of such recapture is minimal.
[bullet] General disenchantment with real estate investments and with long-term
investments in limited partnerships because of, among other things,
their illiquidity.
[bullet] The Offer may be attractive to certain BACs holders who wish in the
future to avoid the continued additional expense, delay and
complication in filing income tax returns which result from the
ownership of BACs.
[bullet] The Offer provides BACs holders with the opportunity to liquidate
their BACs and to reinvest the proceeds in other investments should
they desire to do so.
3
[bullet] The Purchaser believes that the BACs represent an attractive
investment at the Purchase Price based upon, in part, the expected
remaining Tax Credits and tax losses. There can be no assurance,
however, that this judgment is correct. Therefore, ownership of BACs
will remain a speculative investment.
Following the completion of the Offer and subject to the terms of the
Standstill Agreement, the Purchaser and its affiliates may acquire additional
BACs. Any such acquisitions may be made through private purchases, through one
or more future tender offers or by any other means deemed advisable, and may be
at prices higher or lower than the price to be paid for the BACs purchased
pursuant to the Offer. See Section 8 ("Purpose of the Offer; Future Plans").
The Offer is not conditioned upon any minimum number of BACs being
tendered. If, as of the Expiration Date, more than 14,732 BACs are validly
tendered and not properly withdrawn, the Purchaser will only accept for
purchase on a pro rata basis 14,732 BACs, subject to the terms and conditions
herein. See Section 14 ("Conditions of the Offer").
BACs holders are urged to consider carefully all of the information
contained herein before accepting the Offer.
The Purchaser expressly reserves the right, in its sole discretion and for
any reason, to terminate the Offer at any time and to waive any or all of the
conditions of the Offer, although the Purchaser does not presently intend to
waive any such conditions. See Section 7 ("Effects of the Offer"). In order to
comply with certain restrictions set forth in the Partnership Agreement,
tenders of less than all BACs owned by a BACs holder that would result in a
BACs holder holding less than 5 BACs will not be accepted.
According to the Form 10-Q, there were 58,928 BACs issued and outstanding,
which represent 58,928 Limited Partnership Interests issued to the Assignor
Limited Partner. The 10-K reports that as of March 31, 1997 the Partnership had
3,855 registered holders of the issued and outstanding BACs. The Purchaser owns
85 BACs.
Certain historical and factual statements and information contained in
this Offer to Purchase pertaining to the Partnership (such as information with
respect to the properties owned by the Local Partnerships in which the
Partnership has an interest or the financial statements of the Partnership)
were taken directly from statements and information included in the reports and
documents publicly filed by the Partnership with the Securities and Exchange
Commission (the "Commission"). The Purchaser did not prepare any such
information and makes no representation as to the accuracy or completeness of
such statements or information.
Each BACs holder must make his or her own decision whether to accept the
Offer based on his or her particular circumstances. BACs holders should consult
with their respective advisors about the financial, tax, legal and other
implications to them of accepting the Offer. BACs holders are urged to read
this Offer to Purchase, the related Letter of Transmittal and the other
accompanying materials carefully before deciding whether to tender their BACs.
THE TENDER OFFER
1. Terms of the Offer.
Upon the terms of the Offer (including the terms and conditions of any
extension or amendment of the Offer), the Purchaser will accept for payment and
pay for up to 14,732 BACs that are validly tendered on or prior to the
Expiration Date (as hereinafter defined) and not withdrawn in accordance with
Section 4 ("Withdrawal Rights"). The term "Expiration Date" shall mean 12:00
midnight, New York City time, on December 10, 1997, unless the Purchaser, in
its sole discretion, shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" shall refer to the
latest time and date at which the Offer, as so extended by the Purchaser, will
expire.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
PURCHASE PRICE OFFERED TO BACs HOLDERS, SUCH INCREASED PURCHASE PRICE SHALL BE
PAID FOR ALL BACs ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, WHETHER OR NOT
SUCH BACs WERE TENDERED PRIOR TO THE INCREASE OF THE PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14 ("Conditions of the Offer"). The Purchaser reserves the right (but
shall not be obligated), in its sole discretion, to waive any or all of such
conditions.
4
If, on or prior to the Expiration Date, any or all of such conditions have not
been satisfied or waived, the Purchaser may (i) decline to purchase any of the
BACs tendered, terminate the Offer and return all tendered BACs to tendering
BACs holders, (ii) waive all the then unsatisfied conditions and, subject to
complying with applicable rules and regulations of the Commission, purchase all
BACs validly tendered, (iii) extend the Offer and, subject to the right of BACs
holders to withdraw BACs until the Expiration Date, retain the BACs that have
been tendered during the period or periods for which the Offer is extended, or
(iv) amend the Offer.
At the request of the Purchaser, and pursuant to Rule 14d-5 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Offer to
Purchase, the related Letter of Transmittal and, if required, any other
relevant materials are being mailed, at the Purchaser's expense, by the
Partnership to BACs holders, Beneficial Owners and Assignees who hold BACs, to
the extent their names and addresses are reflected on the books and records of
the Partnership.
2. Proration; Acceptance for Payment and Payment for BACs.
If more than 14,732 BACs are validly tendered on or prior to the
Expiration Date and not properly withdrawn on or prior to the Expiration Date,
the Purchaser will only accept for payment, upon the terms and subject to the
conditions of the Offer, and pay for an aggregate of 14,732 BACs so tendered,
pro rata according to the number of BACs validly tendered and not properly
withdrawn on or prior to the Expiration Date, with appropriate adjustments to
avoid purchases that would violate the transfer restrictions in Section 7.1 of
the Partnership Agreement (the "Transfer Restrictions"). If the number of BACs
validly tendered and not properly withdrawn on or prior to the Expiration Date
is less than or equal to 14,732 BACs, the Purchaser will purchase all BACs so
tendered and not properly withdrawn, upon the terms and subject to the
conditions of the Offer.
If proration of tendered BACs is required, and because of the difficulty
of determining the proration results, the Purchaser may not be able to announce
the final results of such proration until at least approximately seven business
days after the Expiration Date. Subject to the Purchaser's obligation under
Rule 14e-1(c) under the Exchange Act, to pay BACs holders the Purchase Price in
respect of BACs tendered or return those BACs promptly after the termination or
withdrawal of the Offer, the Purchaser does not intend to pay for any BACs
accepted for payment pursuant to the Offer until the final proration results
are known.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will purchase, by accepting for payment,
and will pay for, all BACs validly tendered and not withdrawn in accordance
with Section 4 on or prior to the Expiration Date as promptly as practicable
following the Expiration Date. In addition, subject to applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, BACs pending receipt of any regulatory or
governmental approvals specified in Section 15 ("Certain Legal Matters") or
pending receipt of any additional documentation required by the Letter of
Transmittal. In all cases, payment for BACs accepted for payment pursuant to
the Offer will be made only after timely receipt by the Information
Agent/Depositary of (a) the Letter of Transmittal properly completed and duly
executed and (b) any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment tendered BACs when, as and if the Purchaser gives oral or written
notice to the Information Agent/Depositary of the Purchaser's acceptance for
payment of such BACs pursuant to the Offer. No tender of BACs will be deemed to
have been validly made until all defects and irregularities with respect to
such tender have been cured or waived. Upon the terms and subject to the
conditions of the Offer, payment for BACs tendered and accepted for payment
pursuant to the Offer will in all cases be made by deposit of the Purchase
Price with the Information Agent/Depositary, which will act as agent for the
tendering BACs holders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering BACs holders.
The Purchase Price will be automatically reduced by $14 per BAC for each
month (or part of a month) between December 31, 1997 and the date of transfer
for BACs transferred after December 31, 1997. Under no circumstances will the
Purchaser pay interest on the Purchase Price for BACs.
If any tendered BACs are not purchased pursuant to the Offer for any
reason, the Letter of Transmittal with respect to such BACs will be destroyed
by the Information Agent/Depositary. If, for any reason whatsoever, acceptance
for payment of or payment for any BACs tendered pursuant to the Offer is
delayed or the Purchaser is unable
5
to accept for payment, purchase or pay for BACs tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights under Section 14 ("Conditions
of the Offer"), the Information Agent/Depositary may, nevertheless, on behalf
of the Purchaser and subject to Rule 14e-1(c) under the Exchange Act, retain
tendered BACs, and such BACs may not be withdrawn except to the extent that the
tendering BACs holder is entitled to withdrawal rights as described in Section
4 ("Withdrawal Rights").
3. Procedures for Tendering BACs.
Valid Tender. For BACs to be validly tendered pursuant to the Offer, a
Letter of Transmittal or facsimile thereof properly completed and duly
executed, together with any other documents required by the Letter of
Transmittal, must be received by the Information Agent/Depositary at its
address or facsimile number on the back cover page of the Offer to Purchase on
or prior to the Expiration Date. If tendering by facsimile, a BACs holder
should subsequently send original copies of the Letter of Transmittal and any
other documents required by the Letter of Transmittal to the Information
Agent/Depositary at its address on the back cover of the Offer to Purchase. In
order to comply with certain restrictions set forth in the Partnership
Agreement, tenders of less than all BACs owned by a BACs holder that would
result in a BACs holder holding less than 5 BACs will not be accepted. See
Instructions to the Letter of Transmittal.
In order for a tendering BACs holder to participate in the Offer, BACs
must be validly tendered and not withdrawn on or prior to the Expiration Date,
which is 12:00 midnight, New York City time, on December 10, 1997, unless
extended.
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering BACs holder and delivery
will be deemed made only when actually received by the Information
Agent/Depositary. If delivery is by mail, registered mail with return receipt
requested is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
Backup Federal Income Tax Withholding. To prevent the possible application
of backup federal income tax withholding with respect to payment of the
Purchase Price pursuant to the Offer, a tendering BACs holder must execute the
Letter of Transmittal, thereby certifying such BACs holder's correct taxpayer
identification number or social security number.
FIRPTA Withholding. To prevent the withholding of federal income tax in an
amount equal to 10% of the sum of the Purchase Price plus the amount of
Partnership liabilities allocable to each BAC purchased, each BACs holder must
execute the Letter of Transmittal, thereby certifying such BACs holder's
taxpayer identification number and address and that the BACs holder is not a
foreign person.
Appointment as Proxy; Power of Attorney. By executing and delivering the
Letter of Transmittal, a tendering BACs holder irrevocably appoints the
Purchaser and the designees of the Purchaser and each of them as such BACs
holder's proxies, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of such BACs holder's
rights with respect to the BACs tendered by such BACs holder and accepted for
payment by the Purchaser (and with respect to any and all other BACs or other
securities issued or issuable in respect of such BACs on or after the date
hereof). All such proxies shall be considered irrevocable and coupled with an
interest in the tendered BACs. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts such BACs for payment. Upon such
acceptance for payment, all prior proxies given by such BACs holder with
respect to such BACs (and such other BACs and securities) will be revoked
without further action, and no subsequent proxies may be given nor any
subsequent written consents executed (and, if given or executed, will not be
deemed effective). The Purchaser and its designees will, with respect to the
BACs (and such other BACs and securities) for which such appointment is
effective, be empowered to exercise all voting and other rights of such BACs
holder as it in its sole discretion may deem proper pursuant to the Partnership
Agreement or otherwise. The Purchaser may assign such proxy and/or power of
attorney to any person with or without assigning the related BACs with respect
to which such proxy and/or power of attorney was granted. The Purchaser
reserves the right to require that, in order for BACs to be deemed validly
tendered, immediately upon the Purchaser's payment for such BACs, the Purchaser
must be able to exercise full voting rights with respect to such BACs and other
securities.
In addition, pursuant to such appointment as attorneys-in-fact, the
Purchaser and its designees each will have the power, among other things, (i)
to seek to transfer ownership of such BACs on the books and records of the
Partnership maintained by the Assignor Limited Partner (and execute and deliver
any accompanying evidences of
6
transfer and authenticity any of them may deem necessary or appropriate in
connection therewith, including, without limitation, any documents or
instruments required to be executed under the Partnership Agreement or a
"Transferor's (Seller's) Application for Transfer" created by the NASD, if
required), (ii) upon receipt by the Information Agent/Depositary (as the
tendering BACs holder's agent) of the Purchase Price, to be allocated all Tax
Credits and tax losses and to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such BACs in
accordance with the terms of the Offer, (iii) to execute and deliver to the
Partnership, the General Partner and/or the Assignor Limited Partner (as the
case may be) a change of address form instructing the Partnership to send any
and all future distributions to which the Purchaser is entitled pursuant to the
terms of the Offer in respect of tendered BACs to the address specified in such
form, and (iv) to endorse any check payable to or upon the order of such BACs
holder representing a distribution, if any, to which the Purchaser is entitled
pursuant to the terms of the Offer, in each case on behalf of the tendering
BACs holder.
Assignment of Entire Interest in the Partnership. By executing and
delivering the Letter of Transmittal, a tendering BACs holder irrevocably
assigns to the Purchaser and its assigns all of the, direct and indirect,
right, title and interest of such BACs holder in the Partnership with respect
to the BACs tendered and purchased pursuant to the Offer, including, without
limitation, such BACs holder's right, title and interest in and to any and all
Tax Credits and tax losses and any and all distributions made by the
Partnership after the Expiration Date in respect of the BACs tendered by such
BACs holder 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
Expiration Date. Upon the Purchaser's acceptance of, and payment for, tendered
BACs, a tendering BACs holder will no longer be entitled to any benefits as a
BACs holder, regardless of whether such BACs holder retains a Beneficial
Assignment Certificate. The Purchaser reserves the right to transfer or assign,
in whole or from time to time in part, to any third party, the right to
purchase BACs tendered pursuant to the Offer, together with its rights under
the Letter of Transmittal, but any such transfer or assignment will not relieve
the assigning party of its obligations under the Offer or prejudice the rights
of tendering BACs holders to receive payment for BACs validly tendered and
accepted for payment pursuant to the Offer.
Determination of Validity. All questions as to the form of documents and
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of BACs will be determined by the Purchaser, in its sole discretion,
whose determination shall be final and binding on all parties. The Purchaser
reserves the absolute right to reject any or all tenders determined by it not
to be in proper form, or the acceptance of or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in any tender of BACs of any particular BACs holder whether or not
similar defects or irregularities are waived in the case of other BACs holders.
Assignee Status. Assignees must provide documentation to the Information
Agent/Depositary which demonstrates, to the satisfaction of the Purchaser, such
person's status as an assignee of a BAC.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. No tender of BACs will be deemed to have been validly made
until all defects and irregularities with respect to such tender have been
cured or waived. None of the Purchaser, any of its affiliates or assigns, if
any, the Information Agent/Depositary or any other person will be under any
duty to give any notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification.
The Purchaser's acceptance for payment of BACs tendered pursuant to the
procedures described above will constitute a binding agreement between the
tendering BACs holder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. Withdrawal Rights.
Tenders of BACs made pursuant to the Offer are irrevocable, except that
BACs tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment as provided in
this Offer to Purchase, may also be withdrawn at any time after January 9,
1998.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Information
Agent/Depositary at the address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name(s) of the
person(s) who tendered the BACs to be withdrawn,
7
the number of BACs to be withdrawn and the name(s) of the registered holder(s)
of the BACs, if different from that of the person(s) who tendered such BACs.
Such notice of withdrawal must also be signed by the same person(s) who signed
the Letter of Transmittal in the same manner as the Letter of Transmittal was
signed (including, if applicable, medallion signature guarantees). If the BACs
are held in the name of two or more persons, all such persons must sign the
notice of withdrawal. Any BACs properly withdrawn will be deemed not validly
tendered for purposes of the Offer, but may be re-tendered at any subsequent
time prior to the Expiration Date by following the procedures described in
Section 3 ("Procedures for Tendering BACs").
If, for any reason whatsoever, acceptance for payment of any BACs tendered
pursuant to the Offer is delayed, or the Purchaser is unable to accept for
payment or pay for BACs tendered pursuant to the Offer, then, without prejudice
to the Purchaser's rights set forth herein, the Information Agent/Depositary
may, nevertheless, on behalf of the Purchaser, retain tendered BACs and such
BACs may not be withdrawn except to the extent that the tendering BACs holder
is entitled to and duly exercises withdrawal rights as described herein. The
reservation by the Purchaser of the right to delay the acceptance or purchase
of or payment for BACs is subject to the provisions of Rule 14e-1(c) under the
Exchange Act, which requires the Purchaser to pay the consideration offered or
return BACs tendered by or on behalf of BACs holders promptly after the
termination or withdrawal of the Offer.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser, any of its affiliates or assigns, if any, the Information
Agent/Depositary or any other person will be under any duty to give any
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. Extension of Tender Period; Termination; Amendment.
The Purchaser reserves the right, in its sole discretion and regardless of
whether any of the conditions set forth in Section 14 ("Conditions of the
Offer") shall have been satisfied, 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, any BACs, (ii) to terminate the
Offer and not accept for payment any BACs not already accepted for payment or
paid for, and (iii) to amend the Offer in any respect by giving oral or written
notice of such amendment to the Information Agent/Depositary.
If the Purchaser increases or decreases either the number of the BACs
being sought or the consideration to be paid for any BACs pursuant to the Offer
and the Offer is scheduled to expire at any time before the expiration of a
period of 10 business days from, and including, the date that notice of such
increase or decrease is first published, sent or given in the manner specified
below, the Offer will be extended until, at a minimum, the expiration of such
period of 10 business days. If the Purchaser makes a material change in the
terms of the Offer (other than a change in price or percentage of securities
sought) or in the information concerning the Offer, or waives a material
condition of the Offer, the Purchaser will extend the Offer, if required by
applicable law, for a period sufficient to allow BACs holders to consider the
amended terms of the Offer.
The Purchaser also reserves the right, in its sole discretion, if any of
the conditions specified under Section 14 ("Conditions of the Offer") shall not
have been satisfied and so long as BACs have not theretofore been accepted for
payment, to delay (except as otherwise required by applicable law) acceptance
for payment of or payment for BACs or to terminate the Offer and not accept for
payment or pay for BACs.
If the Purchaser extends the period of time during which the Offer is
open, delays acceptance for payment of or payment for BACs or is unable to
accept for payment or pay for BACs pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Information
Agent/Depositary may, on behalf of the Purchaser, retain all BACs tendered, and
such BACs may not be withdrawn except as otherwise provided under Section 4
("Withdrawal Rights"). The reservation by the Purchaser of the right to delay
acceptance for payment of or payment for BACs is subject to applicable law,
which requires that the Purchaser pay the consideration offered or return the
BACs deposited by or on behalf of BACs holders promptly after the termination
or withdrawal of the Offer.
Any extension, termination or amendment of the Offer will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which the Purchaser may choose to make any public announcement, the
Purchaser will have no obligation (except as otherwise required by applicable
law) to publish,
8
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Xxxxx News Service. In the case of an extension of
the Offer, the Purchaser will make a public announcement of such extension no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
6. Certain Federal Income Tax Consequences.
The following summary is a general discussion of certain federal income
tax consequences of a sale of BACs pursuant to the Offer assuming that the
Partnership is a partnership for federal income tax purposes and that it is not
a "publicly traded partnership" as defined in Section 7704 of the Internal
Revenue Code of 1986, as amended (the "Code"). This summary is based on the
Code, applicable Treasury Regulations thereunder, administrative rulings,
practice and procedures and judicial authority 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 BACs holder in
light of such BACs holder's specific circumstances or to certain types of BACs
holders subject to special treatment under the federal income tax laws (for
example, foreign persons (if any), dealers in securities, banks, insurance
companies and tax-exempt entities), nor does it discuss any aspect of state,
local, foreign or other tax laws. Sales of BACs pursuant to the Offer will be
taxable transactions for federal income tax purposes, and may also be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
BACs HOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH BACs HOLDER OF SELLING BACs PURSUANT TO THE OFFER,
INCLUDING, WITHOUT LIMITATION, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.
Consequences to Tendering BACs holder. A BACs holder will recognize gain
or loss on a sale of BACs pursuant to the Offer equal to the difference between
(i) the BACs holder's "amount realized" on the sale and (ii) the BACs holder's
adjusted tax basis in the BACs sold. The "amount realized" with respect to a
BAC sold pursuant to the Offer will be a sum equal to the amount of cash
received by the BACs holder for the BAC plus the amount of Partnership
liabilities allocable to the BAC (as determined under Code Section 752). The
amount of a BACs holder's adjusted tax basis in BACs sold pursuant to the Offer
will vary depending upon the BACs holder's particular circumstances, and will
be affected by allocations of Partnership income, gain or loss, and any
historic tax credits to a BACs holder with respect to such BACs. In this
regard, tendering BACs holders will be allocated a pro rata share of the
Partnership's taxable income or loss with respect to BACs sold pursuant to the
Offer through the effective date of the sale.
Tendering BACs holders who have not utilized passive losses: A BACs holder
who sells his or her BACs pursuant to this Offer will receive $725 of proceeds
per BAC that may result in a tax loss of approximately $240 per BAC, which loss
could be available to reduce income from other sources. Tendering BACs holders
who have utilized passive losses: An individual BACs holder who sells his or
her BACs pursuant to this Offer, who acquired BACs pursuant to the original
offering of BACs by the Partnership and who has utilized all of his passive
losses is expected to recognize a tax loss of approximately $15 per BAC.
In general, the character (as capital or ordinary) of BACs holder's gain
or loss on a sale of a BAC pursuant to the Offer will be determined by
allocating the BACs holder's amount realized on the sale and his adjusted tax
basis in the BACs sold between "Section 751 items," which are "inventory items
of the partnership" and "unrealized receivables" (including depreciation
recapture) as defined in Code Section 751, and non-Section 751 items. The
difference between the portion of the BACs holder's amount realized that is
allocable to Section 751 items and the portion of the BACs holder's adjusted
tax basis in the BACs sold that is so allocable will be treated as ordinary
income or loss, and the difference between the BACs holder's remaining amount
realized and adjusted tax basis will be treated as capital gain or loss
assuming the BACs were held by the BACs holder as a capital asset. The
Purchaser believes that substantially all of any tax loss realized on a sale of
BACs pursuant to the Offer will be treated as a capital loss under these rules,
although it is possible, because a BACs holder's adjusted tax basis in the BACs
sold will be allocated to Section 751 items based on the Partnership's tax
basis in these items, that a BACs holder may recognize ordinary income with
respect to the portion of the BACs holder's amount realized on the sale of a
BAC that is attributable to Section 751 items while recognizing a capital loss
with respect to the balance of the selling price.
Under current law, long-term capital gains of individuals and other
non-corporate taxpayers are taxed at a maximum marginal federal income tax rate
of 20% with respect to assets held more than 18 months (a maximum federal
9
income tax rate of 28% applies to gains with respect to assets held more than
one year but less than 18 months), whereas the maximum marginal federal income
tax rate for other income of such persons is 39.6%. Capital losses are
deductible only to the extent of capital gains, except that 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); in addition, corporations, but not non-corporate taxpayers, are
allowed to carry back excess capital losses to the three preceding taxable
years.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent
of such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income.
If a BACs holder is subject to these restrictions and has unused tax losses
from prior years, such tax losses will generally become available upon a sale
of BACs, provided the BACs holder sells all his BACs. If a BACs holder is
unable to sell all his BACs, the deductibility of such losses would continue to
be subject to the passive activity loss limitation until the BACs holder sells
his remaining BACs. See Section 7 ("Effects of the Offer").
In certain cases, the transfer of an interest in a partnership from which
tax credits were allocated can result in a recapture of the tax credits to the
seller (i.e., the seller would be required to pay an additional amount of tax
equal to the credit "recaptured"). A disposition by a BACs holder of his entire
interest in the Partnership within five years from the date property for which
the Historic Tax Credit was claimed was placed in service will trigger a
recapture of a portion of the Historic Tax Credits previously claimed by the
BACs holder. The Purchaser anticipates that $22 per BAC of Historic Tax Credits
will be recaptured with respect to BACs acquired in the original offering. The
transfer of an interest in an entity that has generated Housing Tax Credits
generally results in a recapture of a portion of the Housing Tax Credits.
However, an exception to this rule is provided for partnerships with 35 or more
partners, such as the Partnership. In order for this rule to be applicable,
within a 12-month period at least 50% (in value) of the ownership of the
Partnership must remain unchanged. The Purchaser anticipates that, as a result
of this rule, the sale of BACs will not cause a recapture of Housing Tax
Credits.
A BACs holder (other than corporations and certain foreign individuals)
who tenders BACs may be subject to 31% backup withholding unless the BACs
holder provides a taxpayer identification number ("TIN") and certifies that the
TIN is correct or properly certifies that he is awaiting a TIN. A BACs holder
may avoid backup withholding by properly completing and signing the Letter of
Transmittal. If a BACs holder does not properly complete and sign the Letter of
Transmittal, thereby failing to make the requisite certifications, the
Purchaser is required to withhold 31% from payments to such BACs holder.
Xxxx realized by a foreign BACs holder on a sale of a BAC pursuant to the
Offer will be subject to federal income tax. Under Section 1445 of the Code,
the transferee of a partnership interest held by a foreign person is generally
required to deduct and withhold a tax equal to 10% of the amount realized on
the disposition. The Purchaser will withhold 10% of the amount realized by a
tendering BACs holder from the Purchase Price payable to such BACs holder
unless the BACs holder properly completes and signs the Letter of Transmittal
certifying the BACs holder's TIN, that such BACs holder is not a foreign person
and the BACs holder's address. Amounts withheld would be creditable against a
foreign BACs holder'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.
Consequences to a Non-Tendering BACs holder. The Purchaser does not
anticipate that a BACs holder who does not tender his or her BACs will realize
any material tax consequences as a result of the election not to tender. The
Purchaser has retained two independent law firms which will deliver opinion
letters that consummation of the Offer will not result in the Partnership being
treated as a publicly-traded partnership for federal income tax purposes. There
can be no assurance, however, that the Internal Revenue Service (the "IRS")
will agree with the conclusions reached in such opinions. There is no precedent
governing whether the Offer will cause the Partnership to be treated as a
publicly-traded partnership for federal income tax purposes. If the IRS
successfully asserted that the Partnership should be treated as a
publicly-traded partnership, investors who are subject to the passive activity
loss rules would not be able to use tax losses derived from the Partnership to
offset income from sources other than the Partnership prior to the investor's
disposition of his entire interest in the Partnership.
7. Effects of the Offer.
Certain Restrictions on Transfer of Interests. The Partnership Agreement
restricts transfers of BACs if, among other things, such transfer would cause a
termination of the Partnership for federal income tax purposes
10
(which termination would occur when BACs that represent 50% or more of the
total Partnership capital and profits are transferred within a twelve-month
period). Consequently, sales of BACs in the secondary market and in private
transactions during the twelve-month period following completion of the Offer
may be restricted, and requests for transfers of BACs during such twelve-month
period may not be recognized. The Purchaser does not intend to purchase BACs to
the extent such purchase would violate the transfer restrictions set forth in
the Partnership Agreement. Based on information provided by the Partnership,
for the period from November 1, 1996 to November 1, 1997, approximately 961
BACs (representing approximately 1.6% of the outstanding BACs) were
transferred. Therefore, the Purchaser does not believe the number of BACs
sought in the Offer will violate the Transfer Restrictions.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange
Act. If a substantial number of BACs are purchased pursuant to the Offer, the
result will be a reduction in the number of BACs holders. In the case of
certain kinds of equity securities like the BACs, a reduction in the number of
securityholders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. The Form 10-K
states: "Neither the BACs nor the Limited Partnership Interests are traded on
any established trading market. The Partnership does not intend to include the
BACs for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market." Therefore, the Purchaser
does not believe a reduction in the number of BACs holders will materially
further restrict the BACs holders' ability to find purchasers for their BACs
through secondary market transactions.
Partnership Profiles, Inc., which publishes the Partnership Spectrum,
tracks recent trades in certain limited partnership interests. The most recent
issue of the Partnership Spectrum (March/April 1997) in which trades in the
BACs were reported indicates that 66 BACs traded in the period from February 1,
1997 through March 31, 1997 at a per BAC price of $860, exclusive of
commissions and transfer costs.
The BACs currently 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 does not expect or intend that consummation of the Offer
will cause the BACs to cease to be registered under Section 12(g) of the
Exchange Act. If the BACs were to be held by fewer than 300 persons, the
Partnership could apply to de-register the BACs under the Exchange Act. Because
the BACs are widely held, however, the Purchaser expects that even if it
purchases the maximum number of BACs in the Offer, the BACs will continue to be
held of record by substantially more than 300 persons.
Influence over All BACs Holder Voting Decisions by Purchaser. Pursuant to
the Partnership Agreement, the Purchaser, through the Assignor Limited Partner,
will have the right to vote each BAC purchased by it pursuant to the Offer. If
the Purchaser is successful in acquiring a significant number of BACs pursuant
to the Offer, the Purchaser could, subject to the Standstill Agreement, be in a
position to significantly influence all Partnership decisions on which BACs
holders, through the Assignor Limited Partner, and Limited Partners,
collectively, may vote. If the maximum number of BACs sought by the Purchaser
is tendered and accepted for payment pursuant to the Offer, the Purchaser will
own approximately 25% of the outstanding BACs. After the Standstill Expiration
Date, the ownership of tendered BACs by the Purchaser could effectively (i)
prevent non-tendering BACs holders from taking actions they desire but that the
Purchaser opposes and (ii) enable the Purchaser to take actions desired by it
but opposed by non-tendering BACs holders. Generally, under the Partnership
Agreement, holders of more than 50% of the Limited Partnership Interests and
BACs (which represent Limited Partnership Interests) are entitled, directly or
through the Assignor Limited Partner, as the case may be, to take action with
respect to a variety of matters, including: approving the removal of any
General Partner and proposing and approving a replacement therefor; approving
the dissolution of the Partnership; approving or disapproving the sale of all
or substantially all of the assets of the Partnership; and most types of
amendments to the Partnership Agreement. No such votes have, however, ever been
taken and the General Partner has indicated that none are presently scheduled
or expected. Although the Purchaser does not have any current plans or
intentions with regard to any of these matters, it will, following the
Standstill Expiration Date, vote the BACs acquired pursuant to the Offer in its
interest, which may, or may not, be in the best interest of non-tendering BACs
holders. Until the Standstill Expiration Date, the Purchaser has agreed to vote
its BACs in the same manner as a majority of all voting BACs holders; provided,
however, the Purchaser shall be entitled to vote its BACs as it determines with
regard to any proposal (i) to remove the General Partner or (ii) concerning the
reduction of any fees, profits, distributions or allocations for the benefit of
the General Partner or its affiliates.
It is likely that the Purchaser, which is affiliated with the General
Partner, will vote all of its BACs to continue the General Partner as the
general partner of the Partnership and in a manner that is otherwise consistent
with the
11
decisions and recommendations of the General Partner, including as they relate
to matters involving transactions between the Partnership and affiliates of the
Purchaser. Therefore, the Purchaser's acquisition of BACs may have the effect
of making any future change of the Partnership's policies and/or current
management more difficult.
8. Purpose of the Offer; Future Plans.
Purpose of the Offer. The purpose of the Offer is to enable the Purchaser
to acquire a significant interest in the Partnership for investment purposes
based on its expectation that the Partnership will continue to generate Tax
Credits and tax losses attributable to the BACs. The Purchaser intends to sell,
and has begun the process of selling, membership interests in the Purchaser to
third parties with a need for Tax Credits and/or tax losses. The aggregate
sales price of the Purchaser's membership interests to third parties will be
equal to the aggregate purchase price for the tendered BACs and all other
securities acquired by the Purchaser pursuant to secondary market transactions
and other tender offers conducted to date, together with the expenses
associated therewith, the expenses associated with the Purchaser's sale of
membership interests and the prepayment of certain fees and expenses in
connection with the Purchaser's operations. Neither the Purchaser nor its
current members will derive a profit from the sale of the Purchaser's
membership interests. However, affiliates of the Purchaser expect to earn fees
in connection with such sales, for structuring this transaction and for
performing certain services for the Purchaser.
Another purpose of the Offer is to allow BACs holders who have a current
or anticipated need or desire for liquidity to sell their BACs. An additional
purpose of the Offer is to establish a standard against which any subsequent
tender offers for BACs can be judged.
The Purchaser does not currently intend to make any effort to change
current management or the operation of the Partnership nor does it have any
current plans or intentions for any extraordinary transaction involving the
Partnership. However, the Purchaser's plans with respect to its investment in
the BACs could change at any time in the future. If such plans with respect to
the Partnership change in the future, the ability of the Purchaser to influence
actions on which BACs holders (through the Assignor Limited Partner) have a
right to vote will depend on the BACs holders' response to the Offer (i.e., the
number of BACs tendered). If the Purchaser acquires only a small number of BACs
pursuant to the Offer, it will not be in a position to influence matters over
which BACs holders have a right to vote. Conversely, if the maximum number of
BACs sought are tendered and accepted for payment pursuant to the Offer, the
Purchaser will own approximately 25% of the issued and outstanding BACs and, as
a result, will, subject to the Standstill Agreement, be in a position to exert
significant influence over matters on which BACs holders (through the Assignor
Limited Partner) have a right to vote. The purchase of the BACs will allow the
Purchaser to benefit from any of the following: (a) any and all Tax Credits and
tax losses attributable to such BACs; (b) any cash distributions from
Partnership operations in the ordinary course of business; (c) distributions,
if any, of net proceeds from the sale of any Properties after the Partnership
has satisfied its liabilities; and (d) any distributions of net proceeds from
the dissolution of the Partnership.
Future Plans. Following the completion of the Offer and subject to the
terms of the Standstill Agreement, the Purchaser and its affiliates may acquire
additional BACs. Any such acquisition may be made through private purchases,
through one or more future tender offers or by any other means deemed
advisable, and may be at prices higher or lower than the price to be paid for
the BACs purchased pursuant to the Offer. Additionally, the Purchaser intends
to sell, and has begun the process of selling, membership interests in the
Purchaser to third parties with a need for Tax Credits and/or tax losses. The
aggregate sales price of the Purchaser's membership interests to third parties
will be equal to the aggregate purchase price for the tendered BACs and all
other securities acquired by the Purchaser pursuant to secondary market
transactions and other tender offers conducted to date, together with the
expenses associated therewith, the expenses associated with the Purchaser's
sale of membership interests and the prepayment of certain fees and expenses in
connection with the Purchaser's operations. Neither the Purchaser nor its
current members will derive a profit from the sale of the Purchaser's
membership interests. In connection with such sales and in consideration for
structuring this transaction and for certain services to be performed for the
Purchaser, however, it is expected that affiliates of the Purchaser will earn
fees. These fees will be, in part, dependent on the amount third parties are
willing to pay for membership interests and the amount of membership interests
sold. There can be no assurance, however, that any membership interests in the
Purchaser will be sold or at what price.
Pursuant to the Standstill Agreement with the Partnership and the General
Partner (a copy of which has been filed as Exhibit (c)(1) to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission on November
10, 1997), the Purchaser agreed that, prior to the Standstill Expiration Date,
it will not and it will
12
cause certain affiliates not to (i) seek to propose to enter into, directly or
indirectly, any merger, consolidation, business combination, sale or
acquisition of assets, liquidation, dissolution or other similar transaction
involving the Partnership, (ii) form, join or otherwise participate in a
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting securities of the Partnership, except that those
affiliates bound by the Standstill Agreement will not be deemed to have
violated it and formed a "group" solely by acting in accordance with the
Standstill Agreement, (iii) disclose in writing to any third party any
intention, plan or arrangement inconsistent with the terms of the Standstill
Agreement, or (iv) loan money to, advise, assist or encourage any person in
connection with any action inconsistent with the terms of the Standstill
Agreement. By the terms of the Standstill Agreement, the Purchaser has also
agreed to vote its BACs in the same manner as a majority of all voting BACs
holders; provided, however, the Purchaser is entitled to vote its BACs as it
determines with regard to any proposal (i) to remove the General Partner or
(ii) concerning the reduction of any fees, profits, distributions or
allocations for the benefit of the General Partner or its affiliates.
9. Certain Information Concerning the Partnership.
Information included herein concerning the Partnership is derived from the
Partnership and its publicly filed reports. Additional financial and other
information concerning the Partnership is contained in the Partnership's Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the
Commission. Such reports and other documents may be examined and copies may be
obtained from the public reference facilities maintained at the principal
offices of the Commission at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, at
the regional offices of the Commission located at 0 Xxxxx Xxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000 xxx 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000, and at the Commission's World Wide Web site at
xxxx://xxx.xxx.xxx. 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 Purchaser did not
prepare any information included in such reports and extracted in this Offer to
Purchase and the Purchaser makes no representation as to the accuracy or
completeness of such information.
The Partnership's Assets and Business
The Partnership is a limited partnership formed in 1992, under the laws of
the State of Delaware. Its principal executive offices are located at 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. Its telephone number is (212)
421-5333. The Partnership's fiscal year ends March 31st.
The Partnership was formed to invest, as a limited partner, in other
limited partnerships (referred to herein as "Local Partnerships" or "Subsidiary
Partnerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes") that are eligible for the
low-income housing tax credit ("Housing Tax Credit") enacted in the Tax Reform
Act of 1986, some of which are eligible for the historic rehabilitation tax
credit ("Historic Tax Credit"). Some of the Apartment Complexes benefit from
one or more other forms of federal or state housing assistance. The
Partnership's investment in each Local Partnership represents 98.99% of the
partnership interests in the Local Partnership. According to the Form 10-Q, as
of June 30, 1997, the Partnership had acquired an interest in 15 Local
Partnerships. The Partnership does not anticipate making any additional
investments.
Independence SLP L.P. ("Independence SLP") is the special limited partner
in all 15 Local Partnerships and is an affiliate of the General Partner.
Independence SLP has certain rights and obligations in its role as special
limited partner which permit Independence SLP to exercise control over the
management and policies of the Local Partnerships.
According to the Form 10-K, the stated investment objectives of the
Partnership are to:
1. Entitle qualified BACs holders to Housing Tax Credits over the Credit
Period (as defined below) with respect to each Apartment Complex;
2. Preserve and protect the Partnership's capital;
3. Participate in any capital appreciation in value of the Apartment
Complexes and provide distributions of sale or refinancing proceeds upon the
disposition of the Apartment Complexes; and
4. Allocate passive losses to individual BACs holders to offset passive
income that they may realize from rental real estate investments and other
passive activities, and allocate passive losses to corporate BACs holders to
offset business income.
13
According to the Form 10-K, one of the Partnership's objectives is to
entitle qualified BACs holders to Housing Tax Credits over the period of the
Partnership's entitlement to claim such Tax Credits (for each Apartment
Complex, generally ten years from the date of investment or, if later, the date
the Apartment Complex is placed in service; referred to herein as the "Credit
Period"). Each of the Local Partnerships in which the Partnership has acquired
an interest has been allocated by the relevant state credit agency the
authority to recognize Housing Tax Credits during the Credit Period provided
that the Local Partnership satisfies the rent restriction, minimum set-aside
and other requirements for recognition of the Housing Tax Credits at all times
during such period. Once a Local Partnership has become eligible to recognize
Housing Tax Credits, it may lose such eligibility and suffer an event of
"recapture" if its property fails to remain in compliance with the Housing Tax
Credit requirements. According to the Form 10-K, none of the Local Partnerships
in which the Partnership has acquired an interest has suffered an event of
recapture. According to the Form 10-K, as of March 31, 1997, there can be no
assurance that the Partnership will achieve its investment objectives as
described above.
According to the Form 10-K, the Partnership and BACs holders began to
recognize Housing Tax Credits with respect to an Apartment Complex when the
Credit Period for such Apartment Complex commenced. Because of the time
required for the acquisition, completion and rent-up of Apartment Complexes,
the amount of Tax Credits per BAC gradually increased over the first three
years of the Partnership. Housing Tax Credits not recognized in the first three
years will be recognized in the 11th through 13th years. According to the Form
10-K, the Partnership generated $6,399,740, $3,997,227 and $624,796 Housing Tax
Credits and $37,112, $619,383 and $1,962,743 Historic Tax Credits during the
1996, 1995 and 1994 tax years, respectively.
According to the Form 10-K, the Partnership holds a 98.99% limited
partnership interest in the 15 Local Partnerships. Attached to this Offer to
Purchase as Schedule II is a schedule of these Local Partnerships (the "Local
Partnership Schedule"), including certain information concerning their
respective Apartment Complexes. Attached to this Offer to Purchase as Schedule
III is additional information concerning these Local Partnerships and their
Apartment Complexes, including information relating to mortgage encumbrances
and accumulated depreciation. The information set forth in Schedules II and III
repeats information set forth in the Form 10-K.
According to the Form 10-K, the General Partner has generally required in
connection with investments in development-stage Apartment Complexes that the
general partners of the Local Partnerships (the "Local General Partners")
provide completion guarantees and/or undertake to repurchase the Partnership's
interest in the Local Partnership if construction or rehabilitation is not
completed substantially on time or on budget ("Development Deficit
Guarantees"). The Development Deficit Guarantees have generally also required
the Local General Partner to provide any funds necessary to cover net operating
deficits of the Local Partnership until such time as the Apartment Complex has
achieved break-even operations. In addition, the General Partner has generally
required that the Local General Partners undertake an obligation to fund
operating deficits of the Local Partnership (up to a stated maximum amount)
during a limited period of time (typically three to five years) following the
achievement of break-even operations ("Operating Deficit Guarantees"). Under
the terms of the Development and Operating Deficit Guarantees, amounts funded
will be treated as operating loans which will not bear interest and which will
be repaid only out of 50% of available cash flow or out of available net sale
or refinancing proceeds. In some instances, the Local General Partners are
required to undertake an obligation to comply with a Rent-Up Guaranty
Agreement, whereby the Local General Partner agrees to pay liquidating damages
if predetermined occupancy rates are not achieved. These payments are made
without right of repayment. In cases where the General Partner deems it
appropriate, the obligations of a Local General Partner under the Development
Deficit, Operating Deficit and/or Rent-Up Guarantees are secured by letters of
credit and/or cash escrow deposits. See "Liquidity and Capital Resources"
below.
According to the Form 10-K, one of the Local Partnerships has experienced
operating difficulties. See "Results of Operations of Certain Local
Partnerships" below.
According to the Form 10-K, all leases at the Properties are generally for
periods not exceeding one to two years and no tenant occupies more than 10% of
the rentable square footage.
Rent from commercial tenants (to which average rental per square foot
applies) comprise less than 5% of the rental revenues of the Partnership. Rents
for the residential units are determined annually by HUD and reflect increases
in consumer price indexes in various geographic areas.
According to the Form 10-K, management of the Partnership continuously
reviews the physical state of the properties and budgets improvements when
required, which are generally funded from cash flow from operations or release
of replacement reserve escrows. No improvements are expected to require
additional financing.
14
According to the Form 10-K, management of the Partnership continuously
reviews the insurance coverage of the properties and believes such coverage is
adequate.
Real estate taxes are calculated using rates and assessed valuations
determined by the township or city in which the property is located. Such taxes
have approximated 1% of the aggregate cost of the Apartment Complexes.
Selected Financial Data. Set forth below is a summary of certain financial
data for the Partnership which has been excerpted from the Form 10-K and the
Form 10-Q. 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.
Statements of Operations
For the Three Months Ended June 30, 1997 and 1996
(unaudited)
Three Months Ended
June 30,
-----------------------------
1997 1996
------------ --------------
Revenues:
Rental income ............................................. $1,865,812 $1,352,485
Other income ............................................. 66,506 116,399
---------- ----------
Total Revenues .......................................... 1,932,318 1,468,884
---------- ----------
Expenses:
General and administrative .............................. 428,846 342,388
General and administrative--related parties ............... 132,382 96,209
Repairs and maintenance ................................. 284,832 238,124
Operating ................................................ 360,052 172,628
Taxes ................................................... 165,481 136,590
Insurance ................................................ 150,790 127,695
Financial, principally interest ........................... 513,489 346,778
Depreciation and amortization ........................... 851,415 557,183
---------- ----------
Total Expenses .......................................... 2,887,287 2,017,595
---------- ----------
Net loss before minority interest ........................ (954,969) (548,711)
Minority interest in loss of subsidiary partnerships ...... 2,850 2,305
---------- ----------
Net loss ................................................... $(952,119) $ (546,406)
========== ==========
Net loss--limited partners ................................. $(942,598) $ (540,942)
========== ==========
Number of BACs outstanding ................................. 58,928 58,928
========== ==========
Net loss per BAC .......................................... $ (16.00) $ (9.18)
========== ==========
15
Summary Selected Financial Data
Year Ended March 31,
-------------------------------------------------------------------
1997 1996 1995 1994
OPERATIONS --------------- --------------- --------------- -------------
Revenues ........................... $ 6,663,351 $ 5,325,045 $ 2,433,861 $ 643,475
Operating Expenses .................. 10,687,879 8,277,953 3,634,184 911,326
------------ ------------ ------------ ----------
Loss before minority interest ...... (4,024,528) (2,952,908) (1,200,323) (267,851)
Minority interest in loss
of subsidiaries .................. 8,916 8,519 7,106 1,404
------------ ------------ ------------ ----------
Net loss ........................... $ (4,015,612) $ (2,944,389) $ (1,193,217) $ (266,447)
============ ============ ============ ==========
Net loss per weighted
average BAC ........................ $ (67.46) $ (49.47) $ (20.06) $ (7.69)
============ ============ ============ ==========
March 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
FINANCIAL POSITION -------------- -------------- -------------- ------------- -----------
Total assets ............ $112,831,500 $116,928,522 $104,107,965 $69,285,916 $5,385,138
============= ============= ============= ============ ===========
Total liabilities ...... $ 68,438,976 $ 68,086,980 $ 52,049,809 $17,077,396 $ 829,838
============= ============= ============= ============ ===========
Minority interest ...... $ 317,189 $ 750,595 $ 1,022,820 $ 859,064 $ 0
============= ============= ============= ============ ===========
Total partners' capital ... $ 44,075,335 $ 48,090,947 $ 51,035,336 $51,349,456 $4,555,300
============= ============= ============= ============ ===========
According to the Form 10-K, during the year ended March 31, 1997, total
assets decreased primarily due to a decrease in cash and cash equivalents
resulting from construction in progress and acquisitions of property and
equipment in excess of net proceeds from mortgage and construction loans and
also the repayments of amounts due to local general partners and affiliates.
This decrease in cash and cash equivalents was partially offset by the increase
in construction in progress and acquisitions of property and equipment net of
depreciation. During the years ended March 31, 1996, 1995 and 1994, total
assets and liabilities increased primarily due to the continued acquisition of
Local Partnerships. Property and equipment increased approximately $37,000,000,
$22,000,000 and $22,000,000 for the years ended March 31, 1996, 1995 and 1994,
respectively. Construction in progress decreased approximately $4,000,000 for
the year ended March 31, 1996 and increased approximately $19,000,000 and
$5,000,000 for the years ended March 31, 1995 and 1994, respectively. Mortgage
notes increased approximately $16,000,000, $9,000,000 and $12,000,000 for the
years ended March 31, 1996, 1995 and 1994, respectively. Construction notes
increased approximately $18,000,000 and $1,000,000 for the years ended March
31, 1995 and 1994, respectively. Due to local general partners and affiliates
increased approximately $6,000,000 and $1,000,000 for the years ended March 31,
1995 and 1994, respectively. For the year ended March 31, 1996, the increase in
property and equipment and construction in progress was partially funded by
capital contributions made to the Local Partnerships resulting in a decrease in
cash and cash equivalents. For the year ended March 31, 1993, there was also an
increase in assets due to capital contributions which were not fully expended.
For the year ended March 31, 1996, minority interest increased due to
distributions received by the local general partners. Minority interest
increased due to capital contributions from local general partners for the
years ended March 31, 1995 and 1994.
Cash Distributions
According to the Form 10-K, the Partnership has made no distributions to
the BACs holders as of March 31, 1997.
Liquidity and Capital Resources
According to the Form 10-Q, the Partnership's primary source of funds
includes interest earned on the proceeds from its offering that terminated as
of April 7, 1994 which were invested in tax-exempt money market instruments
pending final payments to Local Partnerships and a working capital reserve and
interest earned thereon.
According to the Form 10-Q, cash and cash equivalents of the Partnership
and its 15 consolidated subsidiary partnerships decreased approximately
$406,000 during the three months ended June 30, 1997 primarily due to net
16
cash used in operating activities of $246,000; a decrease in due to local
general partners and affiliates relating to investing activities of $124,000;
improvements to property and equipment of $47,000; and a decrease in
capitalization of consolidated subsidiaries attributable to minority interest
of $18,000 which exceeded a decrease in cash held in escrow relating to
investing activities of $15,000; and net proceeds from mortgage notes and
construction loans of $15,000. Included in the adjustments to reconcile the net
loss to cash used in operating activities is depreciation and amortization of
approximately $851,000.
According to the Form 10-Q, the Partnership has working capital reserves
of approximately $445,000 and $493,000 at June 30, 1997 and March 31, 1997,
respectively.
According to the Form 10-Q, Partnership Management Fees owed to the
General Partner amounting to approximately $127,000 and $115,000 were accrued
and unpaid as of June 30, 1997 and March 31, 1997, respectively.
According to the Form 10-K, the Partnership has negotiated Operating
Deficit Guaranty Agreements with all Local Partnerships pursuant to which the
Local General Partners have agreed to fund operating deficits for a specified
period of time. The terms of the Operating Deficit Guaranty Agreements vary for
each Local Partnership, with maximum dollar amounts to be funded for a
specified period of time, generally three years, commencing on the break-even
date. According to the Form 10-K, the gross amount of the Operating Deficit
Guarantees aggregates approximately $5,670,000, none of which had expired as of
March 31, 1997. As of March 31, 1997 and 1996, $193,032 and $187,614,
respectively, had been funded under the Operating Deficit Guaranty Agreements.
All current operating deficit guarantees expire within the next three years.
Management of the Partnership does not expect their expiration to have a
material impact on liquidity, based on prior years' fundings.
In addition, several Local Partnerships have Rent-Up Guaranty Agreements,
in which the Local General Partner agrees to pay liquidating damages if
predetermined occupancy rates are not achieved. The terms of the Rent-Up
Guaranty Agreements vary for each Local Partnership, with maximum dollar
amounts to be funded for a specified period of time. According to the Form
10-K, the gross amount of unexpired Rent-Up Guarantees for the Local
Partnerships is approximately $700,000 as of March 31, 1997. All rent-up
deficit guarantees expire within the next three years. Management of the
Partnership does not expect their expiration to have a material impact on
liquidity, based on prior years' fundings.
According to the Form 10-Q, amounts received from operations of the Local
Partnerships were approximately $0 and $16,000 during the three months ended
June 30, 1997 and 1996, respectively. Management of the Partnership anticipates
receiving distributions in the future, although not to a level sufficient to
permit cash distributions to BACs holders. Management of the Partnership
believes that these distributions, as well as the working capital reserves
referred to above, will be sufficient to fund the Partnership's ongoing
operations for the foreseeable future.
Results of Operations of Certain Local Partnerships
Xxxxxx Xxxxxx Manor, L.P.
According to the Form 10-K, Xxxxxx Xxxxxx Manor, L.P. agreed to an
out-of-court settlement resulting from an alleged breach of contract suit. The
settlement resulted in a loss of $164,860, which is included in general and
administrative expenses in the March 31, 1996 financial statements.
Clear Horizons Limited Partnership
According to the Form 10-K, at December 31, 1996, Clear Horizons Limited
Partnership's ("Clear Horizons") current liabilities exceed its current assets
by over $88,000. Although this condition could raise substantial doubt about
Clear Horizons' ability to continue as a going concern, according to the Form
10-K, such doubt is alleviated as follows:
1. Included in current liabilities at December 31, 1996 is $93,956 owed to
related parties who do not intend to pursue collection beyond Clear
Horizons' ability to pay.
2. The general partner of Clear Horizons has agreed to fund operating
deficits up to $250,000.
Accordingly, management of the Partnership believes that Clear Horizons
has the ability to continue as a going concern for at least one year from
December 31, 1996. According to the Form 10-K, Clear Horizons is named as a
defendant in a lawsuit involving the death of a person shot on the premises of
the apartment project. Clear Horizons' defense is being handled by its
liability insurer. Legal counsel believes that any settlement will be within
17
insurance policy limits, $3,000,000, and there will be no loss to Clear
Horizons. The maximum loss which the Partnership would be liable for is its net
investment in Clear Horizons. According to the Form 10-K, the Partnership's
investment in Clear Horizons at March 31, 1997 and 1996 was approximately
$963,000 and $1,026,000, respectively, and the minority interest balance was
approximately $0 and $45,000, respectively. Clear Horizons' net loss after
minority interest amounted to approximately $63,000, $27,000 and $6,500 for the
years ended March 31, 1997, 1996 and 1995, respectively.
United Xxxxxxx-Xxxxxxxx Limited Partnership
According to the Form 10-K, a former management agent had filed a $70,000
breach of contract claim against United Xxxxxxx Xxxxxxxx Limited Partnership
("United Xxxxxxx") for utility expense xxxxxxxx the former management company
paid on United Xxxxxxx'x behalf prior to 1991. During 1996, United Xxxxxxx
agreed to pay $47,000 under an installment arrangement to reimburse these
utility advances.
Other
According to the Form 10-K, the Partnership's investment as a limited
partner in the Local Partnerships is subject to the risks of potential losses
arising from management and ownership of improved real estate. The
Partnership's investments also could be adversely affected by poor economic
conditions generally, which could increase vacancy levels, rental payment
defaults, and operating expenses, any or all of which could threaten the
financial viability of one or more of the Local Partnerships.
According to the Form 10-K, there also are substantial risks associated
with the operation of Apartment Complexes receiving government assistance.
These risks stem from governmental regulations concerning tenant eligibility,
which may make it more difficult to rent apartments in the complexes;
difficulties in obtaining government approval for rent increases; limitations
on the percentage of income which low- and moderate-income tenants may pay as
rent; the possibility that Congress may not appropriate funds to enable HUD to
make the rental assistance payments it has contracted to make; and that when
the rental assistance contracts expire there may not be market demand for
apartments at full market rents in a Local Partnership's Apartment Complex.
According to the Form 10-K, the Local Partnerships are impacted by
inflation in several ways. Inflation allows for increases in rental rates
generally to reflect the impact of higher operating and replacement costs.
Inflation also affects the Local Partnerships adversely by increasing operating
costs, such as fuel, utilities and labor.
The Partnership Agreement
The General Partner and its affiliates have received or will receive
certain types of compensation, fees or other distributions in connection with
the operations of the Partnership. The arrangements for payment of compensation
and fees set forth in the Partnership Agreement were not determined in
arm's-length negotiations with the Partnership.
Pursuant to the Partnership Agreement, the General Partner is entitled to
a fee (the "Partnership Management Fee") for its services in connection with
the administration of the affairs of the Partnership (including, without
limitation, coordination of communications between the Partnership and BACs
holders and with the Local Partnerships). The Partnership Management Fee is
payable annually and is determined by the General Partner based on its review
of the Partnership's investments, up to a maximum of 0.5% of the Partnership's
Invested Assets (as defined below); provided, however, Partnership Management
Fees for any year will be reduced to the extent that the sum of (i) the
aggregate amount of operating cash flow received by affiliates of the General
Partner or the General Partner itself from Local Partnerships and (ii) the
amount of operating cash flow received by the General Partner from the
Partnership exceeds 1% of all distributions of operating cash flow by the
Partnership for such year. "Invested Assets" means the purchase price paid upon
the acquisition by the Partnership of the Properties and interests in Local
Partnerships, including (i) the total of all fees and commissions paid in
connection with the selection or purchase by the Partnership or Local
Partnerships of any interests in Local Partnerships or any Properties, and (ii)
the amount of all liens and mortgages on the Properties. For the three months
ended June 30, 1997 and the three years ended March 31, 1997, 1996 and 1995,
the General Partner earned aggregate Partnership Management Fees of $12,500,
$87,500, $434,550 and $475,023, respectively. According to the Form 10-Q,
Partnership Management Fees owed to the General Partner amounting to
approximately $127,000 and $115,000 were accrued and unpaid as of June 30, 1997
and March 31, 1997, respectively.
Independence SLP is an affiliate of the General Partner. Independence SLP,
as special limited partner of the Local Partnerships, earned a fee (the "Local
Administrative Fee") of $5,000, $20,000, $12,500 and $15,000 from
18
the Local Partnerships for the three months ended June 30, 1997 and the three
years ended March 31, 1997, 1996 and 1995. According to the Form 10-Q,
Independence SLP is entitled to receive up to $5,000 per year as a Local
Administrative Fee from each Local Partnership of which it is a special limited
partner, but the sum of the aggregate Local Administrative Fee and the
Partnership Management Fee for any year shall not exceed 0.5% of Invested
Assets.
The General Partner and the officers and directors of the General Partner
are each entitled to indemnification under certain circumstances from the
Partnership pursuant to provisions of the Partnership Agreement. Generally, the
General Partner is also entitled to reimbursement of expenditures made on
behalf of the Partnership. An affiliate of the General Partner performs asset
monitoring services for the Partnership. These services include site visits and
evaluations of the Local Partnerships' performance. For the three months ended
June 30, 1997 and the three years ended March 31, 1997, 1996 and 1995, the
Partnership incurred, in the aggregate, $52,603, $101,581, $91,757 and $94,702,
respectively, to the General Partner and its affiliates as reimbursement of
expenditures and asset monitoring made on behalf of the Partnership.
In addition, under the terms of the Partnership Agreement, upon the
removal of a General Partner by the Limited Partners or upon the occurrence of
a "Removal Event", as defined below, the General Partner may be entitled to
receive a fee, which will be payable with interest over a five-year period and
may be secured by the assets of the Partnership. The amount of such fee shall
be the fair market value of the removed General Partner's interest, which
amount could be substantial. The Partnership Agreement deems a "Removal Event"
to have occurred if the business of the Partnership is continued after the
bankruptcy, death, adjudication of incompetence or removal of a General Partner
(subject to certain exceptions pursuant to the Partnership Agreement). A
majority in interest of the Limited Partners may approve the removal of any
General Partner without the concurrence of any General Partner at a meeting of
the Partnership.
10. Certain Information Concerning the Purchaser.
The Purchaser was organized for the purpose of acquiring the BACs pursuant
to the Offer. The principal executive office of the Purchaser is at 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The managing member of the Purchaser (the
"Managing Member") is Lehigh Tax Credit Partners, Inc., a Delaware corporation.
Since its inception, the directors of the Managing Member have been X. Xxxxxxx
Xxxxx, Xxxxxx X. Xxxxxx and Xxxx X. Xxxxxx. The executive officers of the
Managing Member are X. Xxxxxxx Xxxxx, Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxx, Xxxx X.
Xxxxxxxxx and Xxxxxx X. Xxxxx. The business address for each of Messrs. Xxxxx,
Boesky, Hirmes and Schnitzer and Xx. Xxxxx is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000.
For certain information concerning the executive officers and directors of
the Managing Member, see Schedule I to this Offer to Purchase. Other than Xx.
Xxxxx, the persons set forth on Schedule I, who effectively control the
Purchaser, are also officers of Related Independence Associates Inc., the sole
general partner of the General Partner. Therefore, the Purchaser and the
General Partner, subject to its fiduciary duties, may have a conflict of
interest with respect to certain matters involving BACs holders, Limited
Partners and/or the Partnership.
Except as otherwise set forth in this Offer to Purchase or Schedule I
hereto, (1) neither the Purchaser, the Managing Member and, to the best of the
Purchaser's knowledge, the persons listed on Schedule I, nor any affiliate of
the foregoing beneficially owns or has a right to acquire any BACs, (2) neither
the Purchaser, the Managing Member and, to the best of the Purchaser's
knowledge, the persons listed on Schedule I, nor any affiliate thereof or
director, executive officer or subsidiary of the Managing Member has effected
any transaction in the BACs within the past 60 days, (3) neither the Purchaser,
the Managing Member and, to the best of the Purchaser's knowledge, any of the
persons listed on Schedule I, nor any director or executive officer of the
Managing Member has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Partnership,
including, but 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, (4) there have been no
transactions or business relationships which would be required to be disclosed
under the rules and regulations of the Commission between any of the Purchaser,
the Managing Member, or, to the best of the Purchaser's knowledge, the persons
listed on Schedule I, on the one hand, and the Partnership or its affiliates,
on the other hand, and (5) there have been no contracts, negotiations or
transactions between the Purchaser, the Managing Member or, to the best of the
Purchaser's knowledge, the persons listed on Schedule I, on the one hand, and
the Partnership or its affiliates, on the other hand, concerning
19
a merger, consolidation or acquisition, tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets.
The Purchaser owns 85 BACs, which represents less than 1% of the number of
BACs outstanding as reported in the Form 10-Q (the most recently available
filing containing such information). Effective as of October 1, 1997, the
Purchaser effected a private transaction and acquired 45 BACs at a price per
BAC of $807.50. The Purchaser was referred to that selling BACs holder by its
affiliate, Related Capital Company, which received a telephone call from such
party requesting information with respect to persons that may be interested in
purchasing BACs. The Purchaser did not solicit the selling BACs holder.
11. Background of the Offer.
The purpose of the Offer is to enable the Purchaser to acquire a
significant interest in the Partnership for investment purposes based on its
expectation that the Partnership will continue to generate Tax Credits and tax
losses attributable to the BACs. The Purchaser intends to sell, and has begun
the process of selling, membership interests in the Purchaser to third parties
with a need for Tax Credits and/or tax losses. The aggregate sales price of the
Purchaser's membership interests to third parties will be equal to the
aggregate purchase price for the tendered BACs and all other securities
acquired by the Purchaser pursuant to secondary market transactions and other
tender offers conducted to date, together with the expenses associated
therewith, the expenses associated with the Purchaser's sale of membership
interests and the prepayment of certain fees and expenses in connection with
the Purchaser's operations. Neither the Purchaser nor its current members will
derive a profit from the sale of the Purchaser's membership interests. However,
affiliates of the Purchaser expect to earn fees in connection with such sales,
for structuring this transaction and for performing certain services for the
Purchaser.
The Purchaser has commenced other tender offers for the securities of
affiliated partnerships and expects to commence additional tender offers in the
future. In connection with a tender offer commenced on April 10, 1997 by the
Purchaser and the settlement of matters relating to such tender offer, the
Purchaser entered into an agreement with Everest Properties, Inc. ("Everest"),
dated April 23, 1997 (the "Everest Agreement", a copy of which has been filed
as Exhibit (c)(2) to the Purchaser's Tender Offer Statement on Schedule 14D-1
filed with the Commission on November 10, 1997). Pursuant to the Everest
Agreement, the Purchaser granted to Everest, among other things, an option to
purchase up to 25% of the BACs tendered in the Offer on the same terms and
conditions as the Purchaser's purchase of BACs (the "Everest Option"). In
consideration of the foregoing, Everest agreed, among other things, that
neither it nor any of its affiliates will, directly or indirectly: (i) in any
manner, including, without limitation, by tender offer (whether or not pursuant
to a filing made with the Commission), acquire, attempt to acquire or make a
proposal to acquire, directly or indirectly, any securities of the Partnership,
except for (a) the BACs it acquires pursuant to the Everest Option and (b)
purchases of de minimis amounts of securities in the secondary market at the
prevailing secondary market price (it being understood that the purchaser of
such de minimis amounts of securities shall be bound by the terms and
conditions of the Everest Agreement); (ii) seek or propose to enter into,
directly or indirectly, any merger, consolidation, business combination, sale
or acquisition of assets, liquidation, dissolution or other similar transaction
involving the Partnership; (iii) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" or "consents" (as such terms are
used in the proxy rules of the Commission) to vote, or seek to advise or
influence any person with respect to the voting of, any voting securities of
the Partnership; (iv) form, join or otherwise participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of the Partnership; (v) disclose in writing to any third party any
intention, plan or arrangement inconsistent with the terms of the Everest
Agreement; or (vi) loan money to, advise, assist or encourage any person in
connection with any action inconsistent with the terms of the Everest
Agreement. The foregoing restrictions shall continue in full force and effect
forever, in perpetuity, with respect to the securities of the Partnership
unless the Purchaser fails to perform its obligations under the Everest
Agreement. The foregoing description of the Everest Agreement is subject to and
qualified in its entirety by reference to such agreement, which agreement is
incorporated herein by reference.
The Purchaser and the General Partner are effectively controlled by the
same persons. Therefore, the Purchaser and the General Partner, subject to its
fiduciary duties, may have a conflict of interest with respect to certain
matters involving BACs holders, Limited Partners and/or the Partnership. In
order to address certain of those matters, the Purchaser entered into the
Standstill Agreement.
The Partnership expressed concern that consummation of the Offer would
cause it to be classified as a "publicly-traded partnership" (a "PTP") for
federal income tax purposes and, therefore, suffer adverse tax conse-
20
quences. To address this concern, the Purchaser agreed to retain two
independent law firms to deliver legal opinions to the Partnership that
consummation of the Offer will not result in it being treated as a PTP.
The Purchaser requested that the Partnership mail this Offer to Purchase,
the related Letter of Transmittal and other relevant material. On November 10,
1997, the Partnership notified the Purchaser that it anticipated mailing such
materials at the Purchaser's expense on such date and the Offer was commenced
on such date.
12. Source of Funds.
The Purchaser expects that approximately $10,681,000 (exclusive of fees
and expenses) would be required to purchase all of the BACs sought pursuant to
the Offer, if tendered. Other than BACs purchased by Everest pursuant to the
Everest Option, if any, the Purchaser presently contemplates that it will
borrow all of such funds from one of its members pursuant to a promissory note
dated as of November 7, 1997 (a copy of which has been filed as Exhibit (b)(1)
to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed on November
10, 1997), containing substantially the same economic terms and conditions that
such member borrows such funds under an existing credit facility it has
available to it with BankBoston, National Association (formerly known as The
First National Bank of Boston) ("BankBoston") and Fleet National Bank (the
"Lenders"). Alternatively, if the Purchaser has completed its contemplated sale
of membership interests to third parties with a need for the Tax Credits and/or
tax losses attributable to the BACs, the Purchaser may obtain the funds
required to purchase the BACs pursuant to the Offer from capital contributions
from its members.
The existing credit agreement is among the Lenders and RCC Credit
Facility, L.L.C., Related Capital Company and The Related Companies, L.P.. The
stated interest rate is the "Base Rate" (as publicly announced by BankBoston,
from time to time) plus 0.5%, which is presently equal to 9.0% per annum or, at
the election of RCC Credit Facility, L.L.C., the "Euro Loan Rate" plus 2.375%.
All of the BACs tendered pursuant to the Offer and all of the Purchaser's
membership interests will be pledged to the Lenders to secure the loan.
Additionally, Related Capital Company will guarantee all amounts borrowed under
such credit facility.
The Purchaser expects to repay all amounts borrowed from its member by
selling additional membership interests to persons or entities that have a need
for the Tax Credits and/or tax losses from the BACs. No plans or arrangements
have been made with regard to the payment of periodic interest required by the
terms of the loan. However, it is expected that if interest payments are due
and payable, the Purchaser may borrow those funds from its affiliate(s).
If Everest exercises the Everest Option for 25% of all of the BACs sought
pursuant to the Offer and 14,732 BACs are tendered and accepted for payment,
the Purchaser expects that approximately $2,670,000 (exclusive of fees and
expenses) of the aggregate purchase price would be paid by Everest. Xxxxxxx has
informed the Purchaser that Xxxxxxx will obtain all of such funds from
investment funds Everest has raised from investors.
13. Purchase Price Considerations.
The Purchaser has set the Purchase Price at $725 net per BAC (subject to
adjustment as set forth in this Offer to Purchase). The Purchaser considered
the estimated potential benefits to a non-tendering BACs holder (see below in
this Section 13) and determined the Purchase Price in order to provide
comparable potential benefits to a tendering BACs holder.
If you tender your BACs pursuant to the Offer, the Purchaser believes your
aggregate benefits will total $1,603:
Purchase Price: $ 725
Tax Credits Received through December 15, 1997: 393
Tax Savings: 81
Interest to Be Earned on Investing Purchase Price: 426
Historic Tax Credit Recapture: (22)
------
$1,603
======
21
If you retain your BACs, the Purchaser believes your aggregate benefits
will total $1,587:
Tax Credits Received through December 15, 1997: $ 393
Present Value of Expected Remaining Tax Credits: 907
Present Value of Original Investment, if returned: 287
-------
$1,587
=======
The Purchaser believes that the projected aggregate per BAC benefit from
the Offer, together with the benefits received since 1993, total approximately
$1,603. Such benefits include $725 (the Purchase Price) plus $393 (representing
the Tax Credits allocated through December 15, 1997) plus approximately $81
(representing the tax savings, assuming a tax rate of 20% for capital gain and
36% for ordinary income, attributable to the use of a capital loss of $15 and
an ordinary loss of $225 the Purchaser believes an individual BACs holder will
realize if all of his BACs are sold in the Offer) plus approximately $426
(representing the assumed return on the reinvestment of the Purchase Price at
5.75% for approximately 12 years, discounted at a rate of 9%) less
approximately $22 (representing a recapture of Historic Tax Credits). The
projected benefit of $1,603 assumes the BACs holder acquired the BACs pursuant
to the original offering and such BACs holder did not utilize any passive
losses. The projected benefit may be more or less depending on, among other
things, a tendering BACs holder's tax rate and the return a tendering BACs
holder may earn upon investing the Purchase Price.
The Purchaser believes that such aggregate projected benefit compares
favorably with the potential benefits to a BACs holder who remains in the
Partnership (together with the benefits received since 1993), continuing to
receive Tax Credits, and assuming a return of the present value of the original
investment of $1,000 as, and if, the 15 properties owned by the Local
Partnerships in which the Partnership has an interest are sold for amounts in
excess of the then existing indebtedness and other liabilities. The aggregate
of such potential benefits is estimated by the Purchaser to be approximately
$1,587, which includes $393 (the Tax Credits allocated through December 15,
1997) plus $907 (the present value at 9% of the remaining Tax Credits to be
allocated over the remaining compliance period) plus approximately $287 (the
present value at 9% of a BACs holder's original $1,000 investment, returned
ratably over the 4 years following the end of the compliance period and
assuming a discount rate of 9%). There can, however, be no assurance that these
benefits will be realized. Neither the General Partner nor the Purchaser is
making any representation, and there can be no assurance, that any or all of
the properties owned by the Local Partnerships in which the Partnership has an
interest will be sold and, if sold, will result in distributable cash
sufficient to return any of a BACs holder's original investment.
The Form 10-K states that: "Neither the BACs nor the Limited Partnership
Interests are traded on any established trading market. The Partnership does
not intend to include the BACs for quotation on NASDAQ or for listing on any
national or regional stock exchange or any other established securities
market." At present, privately negotiated sales and sales through
intermediaries (e.g., through the trading system operated by Chicago
Partnership Board, Inc., which publishes sales by holders of BACs) are the only
means available to BACs holders to liquidate an investment in BACs (other than
the Offer) because the BACs are not listed or traded on any exchange or quoted
on any NASDAQ list or system. According to Partnership Spectrum, an independent
third-party industry publication, for the two months ended March 31, 1997, a
total of 66 BACs traded at a per BAC price of $860. Set forth below is a
schedule of the trading activity of BACs during the year ended March 31, 1997,
in two-month intervals, as reported by The Partnership Spectrum:
Trading Activity for Year Ended March 31, 1997
---------------------------------------------------------------------------
Period Low/High No. of BACs Traded
------------------------------------ -------------- -------------------
April 1, 1996--May 31, 1996 $725/$750 52
June 1, 1996--July 31, 1996 $810/$880 35
August 1, 1996--September 30, 1996 $750/$840 35
October 1, 1996--November 30, 1996 $880/$890 99
December 1, 1996--January 31, 1997 $750/$871.50 126
February 1, 1997--March 31, 1997 $860/$860 66
22
BACs holders are advised, however, that such gross sales prices reported by The
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of BACs, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices.
The Purchase Price represents the price at which the Purchaser is willing
to purchase BACs. No independent person has been retained to evaluate or render
any opinion with respect to the fairness of the Purchase Price and no
representation is made by the Purchaser or any affiliate of the Purchaser as to
such fairness. The Purchaser did not attempt to obtain current independent
valuations or appraisals of the underlying assets owned by the Partnership.
Other measures of the value of the BACs may be relevant to BACs holders. BACs
holders are urged to consider carefully all of the information contained herein
and should consult with their respective tax and other advisors regarding the
terms of the Offer before deciding whether to tender BACs.
14. Conditions of the Offer.
Notwithstanding any other provisions of the Offer and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion, the Purchaser shall not be required to accept
for payment, subject to Rule 14e-1(c) under the Exchange Act, any tendered BACs
and may terminate the Offer as to any BACs not then paid for if, prior to the
Expiration Date, (i) the Purchaser shall not have confirmed to its reasonable
satisfaction that, upon purchase of the BACs pursuant to the Offer, the
Purchaser will have full rights to ownership as to all such BACs and the
Purchaser will become the transferee of the purchased BACs for all purposes
under the Partnership Agreement, (ii) the Purchaser shall not have confirmed to
its reasonable satisfaction that, upon the purchase of the BACs pursuant to the
Offer, the Transfer Restrictions will have been satisfied, or (iii) 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.
Furthermore, notwithstanding any other term of the Offer, the Purchaser will
not be required to accept for payment and may terminate or amend the Offer as
to such BACs if, at any time on or after the date of the Offer and before the
Expiration Date, any of the following conditions exist:
(a) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or 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 (whether or not mandatory), (iii) the commencement or escalation of a
war, armed hostilities or other national or international crisis involving the
United States, (iv) any limitation (whether or not mandatory) imposed by any
governmental authority on, or any other event that might have material adverse
significance with respect to, the nature or extension of credit by banks or
other lending institutions in the United States, or (v) in the case of any of
the foregoing, a material acceleration or worsening thereof; or
(b) any material adverse change (or any condition, event or development
involving a prospective material adverse change) shall have occurred or be
likely to occur in the business, prospects, financial condition, results of
operations, properties, assets, liabilities, capitalization, partners' equity,
licenses, franchises or businesses of the Partnership and its subsidiaries
taken as a whole; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application, audit, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, or by or before any
court or governmental, regulatory or administrative agency, authority or
tribunal, domestic, foreign or supranational, which (i) challenges the
acquisition by the Purchaser of the BACs or seeks to obtain any material
damages as a result thereof, (ii) makes or seeks to make illegal, the
acceptance for payment, purchase or payment for any BACs or the consummation of
the Offer, (iii) imposes or seeks to impose limitations on the ability of the
Purchaser or any affiliate of the Purchaser to acquire or hold or to exercise
full rights of ownership of the BACs, including, but not limited to, the right
to vote (through the Assignor Limited Partner) any BACs purchased by them on
all matters with respect to which BACs holders have the right to direct the
Assignor Limited Partner on the manner in which it will vote on matters
presented to the Limited Partners and BACs holders, (iv) may result in a
material diminution in the benefits expected to be derived by the Purchaser or
any of their affiliates as a result of the Offer, (v) requires divestiture by
the Purchaser of any BACs, (vi) might materially adversely affect the business,
properties, assets, liabilities, financial condition, operations, results of
operations or prospects of the Partnership or the Purchaser, or (vii)
challenges or adversely affects the Offer; or
23
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall have been enacted, promulgated, entered, enforced or
deemed applicable to the Offer, or any other action shall have been taken, by
any government, governmental authority or court, domestic or foreign, other
than the routine application to the Offer of waiting periods that has resulted,
or in the reasonable good faith judgment of the Purchaser could be expected to
result, in any of the consequences referred to in clauses (i) through (vii) of
paragraph (c) above; or
(e) the Partnership or any of its subsidiaries shall have authorized,
recommended, proposed or announced an agreement or intention to enter into an
agreement, with respect to any merger, consolidation, liquidation or business
combination, any acquisition or disposition of a material amount of assets or
securities, or any comparable event, not in the ordinary course of business
consistent with past practices; or
(f) the failure to occur of any necessary approval or authorization by any
federal or state authorities necessary to the consummation of the purchase of
all or any part of the BACs to be acquired hereby, which in the reasonable
judgment of the Purchaser in any such case, and regardless of the circumstances
(including any action of the Purchaser) giving rise thereto, makes it
inadvisable to proceed with such purchase or payment; or
(g) the Purchaser shall become aware that any material right of the
Partnership or any of its subsidiaries under any governmental license, permit
or authorization relating to any environmental law or regulation is reasonably
likely to be impaired or otherwise adversely affected as a result of, or in
connection with, the Offer; or
(h) the Partnership or its General Partner shall have amended, or proposed
or authorized any amendment to, the Partnership Agreement or the Purchaser
shall have become aware that the Partnership or its General Partner has
proposed any such amendment.
The foregoing conditions are for the sole benefit of the Purchaser and its
affiliates and may be asserted by the Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by the Purchaser or any
of its affiliates) giving rise to such condition, or may be waived by the
Purchaser, in whole or in part, from time to time in its sole discretion. The
failure by the Purchaser at any time to exercise the foregoing rights will not
be deemed a waiver of such rights, which will be deemed to be ongoing and may
be asserted at any time and from time to time. Any determination by the
Purchaser concerning the events described in this Section 14 will be final and
binding upon all parties.
15. Certain Legal Matters.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Partnership with the Commission and other
publicly available information regarding the Partnership, the Purchaser is not
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of BACs as contemplated herein, or any
filings, approvals or other actions by or with any domestic or foreign
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of BACs by the Purchaser pursuant to the
Offer as contemplated herein, other than the filing of a Tender Offer Statement
on Schedule 14D-1 (which has been filed) and any required amendments thereto.
Should any such approval or other action be required, 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 or the
Purchaser's businesses might not have to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
action in the event that such approvals were not obtained or such actions were
not taken.
Appraisal Rights. BACs holders will not have appraisal rights as a result
of the Offer.
State Anti-takeover Laws. A number of states have adopted anti-takeover
laws which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations or other entities which are incorporated or
organized in such states or which have substantial assets, securityholders,
principal executive offices or principal places of business therein. Although
the Purchaser has not attempted to comply with any state anti-takeover statutes
in connection with the Offer, the Purchaser reserves the right to challenge the
validity or applicability of any state law allegedly applicable to the Offer
and nothing in this Offer to Purchase nor any action taken in connection
therewith is intended as a waiver of such right. If any state anti-takeover
statute is applicable to the Offer, the Purchaser might be unable to accept for
payment or purchase BACs tendered pursuant to the Offer or be delayed in
continuing
24
or consummating the Offer. In such case, the Purchaser may not be obliged to
accept for purchase or pay for any BACs tendered.
ERISA. By executing and returning the Letter of Transmittal, a BACs holder
will be representing that either (a) the BACs holder is not a plan subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code, or an entity deemed to hold "plan
assets" within the meaning of 29.C.F.R. ss.2510.3-101 of any such plan; or (b)
the tender and acceptance of BACs pursuant to the Offer will not result in a
nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code.
Margin Requirements. The BACs 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.
Antitrust. Under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice and the FTC and certain waiting period requirements
have been satisfied. The Purchaser does not believe any filing is required
under the HSR Act with respect to its acquisition of BACs contemplated by the
Offer.
16. Certain Fees and Expenses.
Except as set forth in this Section 16, the Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of BACs pursuant to the Offer. The Purchaser has retained The Xxxxxx
Group, Inc. to act as Information Agent/Depositary in connection with the
Offer. The Purchaser will pay to the Information Agent/Depositary reasonable
and customary compensation for its services, plus reimbursement for certain
reasonable out-of-pocket expenses, and has agreed to indemnify the Information
Agent/Depositary against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws. The
Purchaser will also pay all costs and expenses of printing and mailing the
Offer and its legal fees and expenses.
17. Miscellaneous.
The Offer is being made to all BACs holders, Beneficial Owners and
Assignees, all to the extent their names and addresses are reflected on the
books and records of the Partnership. The Purchaser is not aware of any state
in which the making of the Offer is prohibited by administrative or judicial
action pursuant to a state statute. If the Purchaser becomes aware of any state
where the making of the Offer is so prohibited, the Purchaser will make a good
faith effort to comply with any such statute or seek to have such statute
declared inapplicable to the Offer. If, after such good faith effort, the
Purchaser cannot comply with any applicable statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) BACs holders in such
state.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, the Purchaser has filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with exhibits, furnishing certain
additional information with respect to the Offer. Such statement 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 with respect to
information concerning the Partnership in Section 9 ("Certain Information
Concerning the Partnership") (except that they will not be available at the
regional offices of the Commission).
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
Lehigh Tax Credit Partners L.L.C.
November 10, 1997
25
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APPENDIX A
GLOSSARY OF DEFINED TERMS
"Assignee" means a person or entity who has purchased BACs but is not
recognized on the books and records of the Partnership maintained by the
Assignor Limited Partner as a registered holder of such BACs.
"Assignor Limited Partner" means Independence Assignor Inc., a Delaware
corporation, or any successor to it which holds Limited Partnership Interests
on behalf of BACs holders.
"BACs" means the beneficial assignment certificates executed by the
Assignor Limited Partner and delivered to a purchaser of BACs in evidence of
the assignment by the Assignor Limited Partner to such BACs holder of all of
the economic and virtually all of the other rights, benefits and privileges of
the ownership of a portion of the Partnership interest of the Assignor Limited
Partner.
"BACs holder" means a holder of BACs and who is reflected as an assignee
of record of BACs on the books and records of the Partnership maintained by the
Assignor Limited Partner.
"Beneficial Owner" means a BACs holder in the case of BACs owned by
Individual Retirement Accounts or Xxxxx plans.
"business day" means any day other than a Saturday, Sunday or federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time, and any time period of business days will be computed in
accordance with Rule 14d-1(c)(6) under the Exchange Act.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Credit Period" has the meaning set forth in Section 9.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Everest" means Everest Properties, Inc.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Expiration Date" has the meaning set forth in Section 1.
"Form 10-K" means the Partnership's Form 10-K for the fiscal year ended
March 31, 1997.
"Form 10-Q" means the Partnership's Form 10-Q for the quarter ended June
30, 1997.
"FTC" means the Federal Trade Commission.
"General Partner" means Related Independence Associates L.P., a Delaware
limited partnership and the general partner of the Partnership. The General
Partner is affiliated with the Purchaser.
"Historic Tax Credits" means any historic rehabilitation credits to tax
allowed to the Partnership and its partners under Section 47 of the Code.
"Housing Tax Credits" means any low-income housing credits to tax allowed
to the Partnership and its partners under Section 42 of the Code.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Independence SLP" means Independence SLP L.P., a Delaware limited
partnership and an affiliate of the General Partner.
"Information Agent/Depositary" means The Xxxxxx Group, Inc.
"IRA" means an individual retirement account.
A-1
"Limited Partner" means the Assignor Limited Partner, the Original Limited
Partner or any other person or entity who is admitted as a Substituted Limited
Partner, at the time of reference thereto, in such person's or entity's
capacity as a limited partner of the Partnership.
"Limited Partnership Interest" means the ownership interest of a Limited
Partner, including its interest in distributions, including liquidating
distributions, and profits and losses of the Partnership and all of its other
rights, duties and obligations under the Partnership Agreement.
"Managing Member" means Lehigh Tax Credit Partners, Inc., a Delaware
corporation and the managing member of the Purchaser.
"NASD" means the National Association of Securities Dealers, Inc.
"Offer" has the meaning set forth in the Introduction.
"Offer to Purchase" means this Offer to Purchase dated November 10, 1997.
"Partnership" means Independence Tax Credit Plus X.X. XX, a Delaware
limited partnership.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of March 31, 1993, by and
among Related Independence Associates L.P., a Delaware limited partnership, as
General Partner, Xxxx X. Xxxxxx as Original Limited Partner, Independence SLP
L.P., a Delaware limited partnership, as Special Limited Partner of Local
Partnerships, Independence Assignor Inc., a Delaware corporation, as Assignor
Limited Partner, and those persons or entities admitted to the Partnership from
time to time as Limited Partners.
"Purchase Price" has the meaning set forth in the Introduction.
"Purchaser" means Lehigh Tax Credit Partners L.L.C., a Delaware limited
liability company and an affiliate of the General Partner.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Standstill Agreement" means the letter agreement, dated November 7, 1997,
among the Partnership, the Purchaser and the General Partner.
"Standstill Expiration Date" means November 7, 2007.
"Substituted Limited Partner" means any person or entity admitted to the
Partnership as a Limited Partner pursuant to the provisions of Section 7.2D of
the Partnership Agreement.
"Tax Credits" means Historic Tax Credits and Housing Tax Credits.
"TIN" means taxpayer identification number.
"Transfer Restrictions" has the meaning set forth in Section 2.
"UBTI" means unrelated business taxable income.
"Unit" means a unit of limited partner interest in the Partnership,
representing a cash contribution of $1,000 to the capital of the Partnership.
A-2
SCHEDULE I
EXECUTIVE OFFICERS AND DIRECTORS OF LEHIGH TAX CREDIT PARTNERS, INC.
Set forth below is the name, current business address, present principal
occupation, and employment history for at least the past five years of each
executive officer and director of Lehigh Tax Credit Partners, Inc. (the
"Managing Member" of the Purchaser). Each person listed below is a citizen of
the United States.
X. Xxxxxxx Xxxxx is a director and executive officer of the Managing
Member. Xx. Xxxxx is also the President and a Director of Related Independence
Associates Inc., the sole general partner of the General Partner. Additionally,
Xx. Xxxxx is the sole stockholder of one of the general partners of Related
Capital Company ("Related Capital"), a New York general partnership that has,
directly or indirectly, sponsored 22 public and 238 private real estate
investment programs that have raised in excess of $2.8 billion from more than
106,000 investors. In that capacity, he is generally responsible for all of
syndication, finance, acquisition and investor reporting activities of Related
Capital and its affiliates. Xx. Xxxxx practiced corporate law in New York City
with the law firm of Proskauer Xxxx Xxxxx & Xxxxxxxxxx from 1974 until he
joined Related in 1979. Xx. Xxxxx graduated from Brooklyn Law School with a
Juris Doctor Degree, magna cum laude; from Long Island University Graduate
School with a Master of Science degree in Psychology; and from Michigan State
University with a Bachelor of Arts degree in History. Xx. Xxxxx'x business
address is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Xxxxxx X. Xxxxxx is a director and executive officer of the Managing
Member. Xx. Xxxxxx is also a Vice President of Related Independence Associates
Inc., the sole general partner of the General Partner. Xx. Xxxxxx practiced
real estate and tax law in New York City with the law firm of Xxxxxxx &
Xxxxxxxxx from 1984 until February 1986 when he joined Related Capital. From
1983 to 1984 Xx. Xxxxxx practiced law with the Boston law firm of Kaye,
Fialkow, Richmond & Xxxxxxxxx and from 1978 to 1980 was a consultant
specializing in real estate at the accounting firm of Laventhol & Xxxxxxx. Xx.
Xxxxxx is the sole stockholder of one of the general partners of Related
Capital. Xx. Xxxxxx graduated from Michigan State University with a Bachelor of
Arts degree and from Xxxxx State School of Law with a Juris Doctor degree. He
then received a Master of Laws degree in Taxation from Boston University School
of Law. Xx. Xxxxxx'x business address is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
Xxxx X. Xxxxxx is a director and executive officer of the Managing Member.
Xx. Xxxxxx is also the Senior Vice President of Related Independence Associates
Inc., the sole general partner of the General Partner. Additionally, Xx. Xxxxxx
has been a Certified Public Accountant in New York since 1978. Prior to joining
Related Capital in October 1983, Xx. Xxxxxx was employed by Wiener & Co.,
certified public accountants. Xx. Xxxxxx is the sole stockholder of one of the
general partners of Related Capital. Xx. Xxxxxx graduated from Hofstra
University with a Bachelor of Arts degree. Xx. Xxxxxx' business address is 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Xxxx X. Xxxxxxxxx is an executive officer of the Managing Member. Xx.
Xxxxxxxxx is also a Vice President of Related Independence Associates Inc., the
sole general partner of the General Partner. Xx. Xxxxxxxxx received a Master of
Business Administration degree from The Xxxxxxx School of The University of
Pennsylvania in December 1987 and joined Related Capital in January 1988. From
1983 to 1986, Xx. Xxxxxxxxx was a Financial Analyst in the Fixed Income
Research department of The First Boston Corporation in New York. Xx. Xxxxxxxxx
is an Executive Vice President of Related Capital. Xx. Xxxxxxxxx received a
Bachelor of Science degree, summa cum laude, in Business Administration from
the School of Management at Boston University in May 1983. Xx. Xxxxxxxxx'x
business address is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Xxxxxx X. Xxxxx is an executive officer of the Managing Member. Prior to
joining Related Capital in 1990, Xx. Xxxxx was a First Vice President with
Resources Funding Corporation where she was responsible for acquiring,
financing, and asset managing multifamily residential properties. From 1981
through 1985 she was an auditor with Price Waterhouse. Xx. Xxxxx is an
Executive Vice President of Related Capital. Xx. Xxxxx holds a Bachelor of
Science in Accounting from The Xxxxxxx School of Management at Boston College.
Xx. Xxxxx'x business address is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
S-1
SCHEDULE II
Local Partnership Schedule
% of Units Occupied at May 1,
---------------------------------------------------------------
Name and Location (Number of Units) Date Acquired 1997 1996 1995 1994 1993
------------------------------------- ---------------- ------------- ------------- ------------- --------------- -----
Lincoln Renaissance
Reading, PA (52) April 1993 100% 98% 100% 0%(1) 0%*
United Xxxxxxx-Xxxxxxxx
Limited Partnership
Chicago, IL (350) October 1993 98% 98% 98% 64%*(1)
Mansion Court Associates
Philadelphia, PA (30) November 1993 93% 100% 100% 47%(1)
Derby Run Associates, L.P.
Hampton, VA (160) February 1994 94% 95% 96% 0%*
Renaissance Plaza '93
Associates, L.P.
Baltimore, MD (95) February 1994 99% 98% 83%(1) 0%*
Xxxxxx Village Associates
Philadelphia, PA (28) May 1994 93% 100% 0%(1) 0%*
Xxxxxx Xxxxxx Manor, L.P.
Los Angeles, CA (77) September 1994 92% 0%* 0%*
Colden Oaks
Limited Partnership
Los Angeles, CA (38) September 1994 95% 97% 100%
Brynview Terrace, L.P.
Los Angeles, CA (8) September 1994 100% 0%* 0%*
NLEDC, L.P.
Los Angeles, CA (43) September 1994 93% 93% 0%*
Creative Choice
Homes VI, Ltd.
Miami, FL (102) September 1994 98% 98% 0%*
P&P Homes for the
Elderly, L.P.
Los Angeles, CA (107) September 1994 68%(1) 0%* 0%*
Clear Horizons
Limited Partnership
Shreveport, LA (84) December 1994 93% 95% 100%
Neptune Venture, L.P.
Neptune Township, NJ (99) April 1995 100% 35%(1)
Affordable Green
Associates L.P.
New York, NY (41) April 1995 100% 100%
----------------
* Properties in construction phase during year indicated.
(1) Properties in rent-up phase during year indicated.
S-2
SCHEDULE III
Certain Information Concerning the Properties
As of March 31, 1997
Initial Cost to Gross Amount at which Carried
Partnership At Close of Period
--------------------------- Cost ------------------------------------------
Capitalized
Subsequent to
Buildings and Acquisition: Buildings and
Description Encumbrances Land Improvements Improvements Land Improvements Total
-------------------------- -------------- ----------- --------------- --------------- ----------- --------------- --------------
Lincoln Renaissance
Reading, PA $ 2,600,000 $ 0 $ 5,240,173 $ 213,623 $ 5,373 $ 5,448,423 $ 5,453,796
United Xxxxxxx Xxxxxxxx
Limited Partnership
Chicago, IL 10,618,998 580,000 6,070,477 10,105,329 585,374 16,170,432 16,755,806
Mansion Court Associates
Philadelphia, PA 1,431,244 19,072 3,224,984 183,450 25,095 3,402,411 3,427,506
Derby Run Associates L.P.
Hampton, VA 4,624,748 407,410 3,069,628 4,557,603 409,771 7,624,870 8,034,641
Renaissance Plaza Assoc.
Baltimore, MD 6,660,547 684,255 9,840,170 4,137,905 686,616 13,975,714 14,662,330
Tasker Village
Philadelphia, PA 1,784,881 18,235 0 3,929,038 20,596 3,926,677 3,947,273
Xxxxxx Xxxxxx Manor, L.P.
Los Angeles, CA 7,806,343 966,577 0 10,198,171 968,938 10,195,810 11,164,748
Colden Oaks Limited
Partnership
Los Angeles, CA 5,308,064 840,374 0 5,872,999 842,735 5,870,638 6,713,373
Brynview Terrrace
Limited Partnership
Los Agneles, CA 949,587 175,943 0 1,354,623 178,304 1,352,262 1,530,566
NLEDC, L.P.
Los Angeles, CA 4,520,203 624,000 0 5,881,927 626,361 5,879,566 6,505,927
Creative Choice Homes
VI Ltd.
Miami, FL 3,243,746 650,072 13,134 5,332,621 652,433 5,343,394 5,995,827
P&P Homes for the
Elderly, L.P.
Los Angeles, CA 6,786,592 0 0 9,633,340 642,360 8,990,980 9,633,340
Life on which
Depreciation in
Year of Latest Income
Accumulated Construction/ Date Statements is
Description Depreciation Renovation Acquired Computed (a)(b)
-------------------------- -------------- --------------- ------------ ----------------
Lincoln Renaissance
Reading, PA $ 405,523 1993-94 Apr. 1993 20-40 years
United Xxxxxxx Xxxxxxxx
Limited Partnership
Chicago, IL 2,091,698 1993-94 Oct. 1993 10-25 years
Mansion Court Associates
Philadelphia, PA 260,148 1993-94 Nov. 1993 40 years
Derby Run Associates L.P.
Hampton, VA 506,194 1994-95 Feb. 1994 40 years
Renaissance Plaza Assoc.
Baltimore, MD 719,971 1994-95 Feb. 1994 27.5 years
Tasker Village
Philadelphia, PA 161,114 1994-95 May 1994 27.5 years
Xxxxxx Xxxxxx Manor, L.P.
Los Angeles, CA 128,303 1994-95 Sept. 1994 27.5 years
Colden Oaks Limited
Partnership
Los Angeles, CA 428,766 1994-95 Sept. 1994 27.5 years
Brynview Terrrace
Limited Partnership
Los Agneles, CA 22,910 1994-95 Sept. 1994 27.5 years
NLEDC, L.P.
Los Angeles, CA 164,331 1994-95 Sept. 1994 27.5 years
Creative Choice Homes
VI Ltd.
Miami, FL 315,870 1994-95 Sept. 1994 40 years
P&P Homes for the
Elderly, L.P.
Los Angeles, CA 129,388 1994-95 Sept. 1994 27.5 years
S-3
Initial Cost to Gross Amount at which Carried
Partnership At Close of Period
---------------------------- Cost -------------------------------------------
Capitalized
Subsequent to
Buildings and Acquisition: Buildings and
Description Encumbrances Land Improvements Improvements Land Improvements Total
----------------------- -------------- ------------ --------------- --------------- ------------ --------------- --------------
Clear Horizons Limited
Partnership
Shreveport, LA 1,290,000 15,304 2,058,729 59,931 17,665 2,116,299 2,133,964
Neptune Venture L.P.
Neptune Township, NJ 0 460,631 10,151,873 114,606 462,465 10,264,645 10,727,110
Affordable Green
Associates L.P.
New York, NY 2,237,12 20,500 3,506,961 30,419 22,334 3,535,546 3,557,880
------------ ----------- ------------ ------------ ----------- ------------- -------------
$59,862,081 $5,462,373 $43,176,129 $61,605,585 $6,146,420 $104,097,667 $110,244,087
============ =========== ============ ============ =========== ============= =============
Life on which
Depreciation in
Year of Latest Income
Accumulated Construction/ Date Statements is
Description Depreciation Renovation Acquired Computed (a)(b)
----------------------- -------------- --------------- ----------- ----------------
Clear Horizons Limited
Partnership
Shreveport, LA 171,785 1994-95 Dec. 1994 27.5 years
Neptune Venture L.P.
Neptune Township, NJ 244,803 1995-96 Apr. 1995 40 years
Affordable Green
Associates L.P.
New York, NY 178,886 1995-96 May 1995 27.5 years
----------- ------- ---------- -------------
$5,929,690
===========
------------
(a) Depreciation is computed using primarily the straight line method over the
estimated useful lives determined by the Partnership date of acquisition.
(b) Personal property is depreciated primarily by the straight lie method over
the estimated useful lives ranging from 5 to 10 years.
Cost of Property and Equipment Accumulated Depreciation
---------------------------------------------- ---------------------------------------
Year Ended March 31,
----------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
-------------- ------------- ------------- ------------ ------------ ---------
Balance at beginning of period $ 83,486,772 $44,926,639 $22,190,071 $2,959,862 $ 857,939 $ 97,077
Additions during period:
Improvements 26,757,315 38,560,133 22,736,568
Depreciation expense 2,969,828 2,101,923 760,862
Deductions during period:
Dispositions 0 0 0 0 0
------------- ------------ ------------ ----------- ----------- ---------
Balance at close of period $110,244,087 $83,486,772 $44,926,639 $5,929,690 $2,959,862 $857,939
============= ============ ============ =========== =========== =========
At the time the Local Partnerships were acquired by Independence Tax Credit
Plus X.X. XX, the entire purchase price paid by Independence Tax Credit Plus
X.X. XX was pushed down to the Local Partnerships as property and equipment
with an offsetting credit to capital. Since the projects were in the
construction phase at the time of acquisition, the capital accounts were
insignificant at the time of purchase. Therefore, there are no material
differences between the original cost basis for tax and GAAP.
S-4
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Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. Questions and requests for assistance may be
directed to the Information Agent/Depositary at the address and telephone
number listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent/Depositary as set forth below, and will be furnished promptly
at the Purchaser's expense. The Letter of Transmittal and any other required
documents should be sent or delivered by each BACs holder to the Information
Agent/Depositary at its address or facsimile number set forth below. If
tendering by facsimile, a BACs holder should subsequently send original copies
of the Letter of Transmittal and any other required documents to the
Information Agent/Depositary at its address set forth below. To be effective, a
duly completed and signed Letter of Transmittal or facsimile thereof must be
received by the Information Agent/Depositary at the address or facsimile
number set forth below before 12:00 midnight, New York City Time, on Wednesday,
December 10, 1997.
By Mail/Hand or Overnight Delivery:
The Xxxxxx Group, Inc.
0000 Xxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, Xxxxx 00000
By Facsimile: (000) 000-0000
For Additional Information Call:
The Xxxxxx Group, Inc.
(000) 000-0000
