Offer to Purchase for Cash
Up to 15,000 Units of Limited Partnership Interest
in
CONSOLIDATED CAPITAL GROWTH FUND,
a California limited partnership
for
$300 Net Per Unit
by
MADISON RIVER PROPERTIES, L.L.C.
-------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME, ON JANUARY 21,
1998, UNLESS THE OFFER IS EXTENDED.
-------------------------------------------------------------------------------
IMPORTANT
Madison River Properties, L.L.C., a Delaware limited liability company
(the "Purchaser"), is offering to purchase up to 15,000 of the outstanding
units of limited partnership interest ("Units") in Consolidated Capital Growth
Fund, a California limited partnership (the "Partnership"), at a purchase price
of $300 per Unit (the "Purchase Price"), net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Assignment of Partnership Interest (which,
together with any supplements or amendments, collectively constitute the
"Offer"). The Purchase Price is subject to adjustment under certain
circumstances, as described herein. Holders of Units (each, a "Limited
Partner") who tender their Units in response to the Offer will not be obligated
to pay any commissions or partnership transfer fees. The Purchaser is an
affiliate of ConCap Equities, Inc., which is the general partner of the
Partnership (the "General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of
and controlled by Insignia Properties Trust ("IPT"), which is
controlled by Insignia Financial Group, Inc. ("Insignia").
IPT, through its operating partnership Insignia Properties,
L.P. ("IPLP"), currently owns 19,305.65 Units (19,112 Units
of which were originally acquired by an entity which was an
affiliate of the General Partner but was not an affiliate of
Insignia, IPT, or the Purchaser, at a purchase price of $200
per Unit, pursuant to a tender offer commenced in November
1992).
o The net liquidation value per Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) is $417.24. The Purchaser
does not believe, however, that the Estimated Liquidation
Value represents a fair estimate of the market value of a
Unit, primarily due to the fact that such estimate does not
take into account timing considerations, market uncertainties
and legal and other expenses that would be incurred in
connection with a liquidation of the Partnership. See Section
13. Accordingly, the Purchaser does not believe that the
Estimated Liquidation Value should be viewed as
representative of the amount a Limited Partner can
realistically expect to obtain on a sale of a Unit in the
near term.
o The Purchaser will have the right to vote all Units acquired
pursuant to the Offer. Accordingly, if the Purchaser (which
is an affiliate of the General Partner) is successful in
acquiring more than 5,292.35 Units, IPT will own in excess of
50% of the total Units outstanding and, accordingly, will be
able to control the outcome of all voting decisions with
respect to the Partnership, including decisions regarding
liquidation, amendments to the Limited Partnership Agreement,
removal and replacement of the General Partner and mergers,
consolidations and other extraordinary transactions. Even if
the Purchaser acquires a lesser number of Units pursuant to
the Offer, however, because IPT already owns (through IPLP)
approximately 39.2% of the outstanding Units it will be able
to significantly influence the outcome of all voting
decisions with respect to the Partnership.
o The Purchaser (which is an affiliate of the General Partner)
is making the Offer with a view to making a profit.
Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the General Partner) to
purchase Units at a low price and the desire of the Limited
Partners to sell their Units at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Units should complete and sign
the Assignment of Partnership Interest in accordance with the Instructions to
the Assignment of Partnership Interest and mail or deliver the signed
Assignment of Partnership Interest to the Depositary. A Limited Partner may
tender any or all of the Units owned by that Limited Partner; provided,
however, that because of restrictions in the Partnership's Limited Partnership
Agreement, a partial tender of Units must be for a minimum of five Units.
Tenders of fractional Units will not be permitted, except by a Limited Partner
who is tendering all of the Units owned by that Limited Partner.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at the address and telephone numbers set forth below and
on the back cover of this Offer to Purchase. No soliciting dealer fees or other
payments to brokers for tenders are being paid by the Purchaser (which is an
affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(000) 000-0000
December 19, 1997
2
TABLE OF CONTENTS
PAGE
INTRODUCTION.................................................................................................... 1
The Purchaser; Affiliation with the General Partner......................................................... 1
Some Factors to Be Considered by Limited Partners........................................................... 1
Reasons for and Effects of the Offer........................................................................ 3
Certain Tax Considerations.................................................................................. 3
Originally Anticipated Term of the Partnership; General Policy Regarding Sales
and Refinancings of Partnership Properties; Alternatives................................................ 3
Conditions.................................................................................................. 4
Distributions............................................................................................... 4
Outstanding Units........................................................................................... 4
THE OFFER....................................................................................................... 5
Section 1. Terms of the Offer; Expiration Date; Proration.................................................. 5
Section 2. Acceptance for Payment and Payment for Units.................................................... 6
Section 3. Procedure for Tendering Units................................................................... 6
Valid Tender............................................................................................ 6
Signature Requirements.................................................................................. 6
Delivery of Assignment of Partnership Interest.......................................................... 7
Appointment as Proxy; Power of Attorney................................................................. 7
Assignment of Interest in Future Distributions.......................................................... 7
Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation
to Give Notice of Defects............................................................................. 8
Backup Federal Income Tax Withholding................................................................... 8
FIRPTA Withholding...................................................................................... 8
Binding Obligation...................................................................................... 8
Section 4. Withdrawal Rights............................................................................... 8
Section 5. Extension of Tender Period; Termination; Amendment.............................................. 9
Section 6. Certain Federal Income Tax Matters.............................................................. 9
General................................................................................................. 9
Gain or Loss Generally.................................................................................. 10
Unrealized Receivables and Certain Inventory............................................................ 10
Passive Activity Loss Limitation........................................................................ 11
Partnership Termination................................................................................. 11
Backup Withholding and FIRPTA Withholding............................................................... 11
Section 7. Effects of the Offer............................................................................ 12
Limitations on Resales.................................................................................. 12
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act.......................... 12
Control of Limited Partner Voting Decisions by Purchaser; Effect of Relationship
with General Partner.................................................................................. 12
Section 8. Future Plans of Insignia, IPT and the Purchaser................................................. 13
Section 9. Certain Information Concerning the Partnership.................................................. 14
General................................................................................................. 14
Originally Anticipated Term of Partnership; Alternatives................................................ 14
General Policy Regarding Sales and Refinancings of Partnership Properties............................... 14
Selected Financial and Property-Related Data............................................................ 14
Cash Distributions History.............................................................................. 17
Operating Budgets of the Partnership.................................................................... 17
Section 10. Conflicts of Interest and Transactions with Affiliates......................................... 17
Conflicts of Interest with Respect to the Offer......................................................... 17
i
PAGE
Voting by the Purchaser................................................................................. 18
Financing Arrangements.................................................................................. 18
Transactions with Affiliates............................................................................ 18
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia........................... 19
The Purchaser........................................................................................... 19
IPT and IPLP............................................................................................ 19
Insignia................................................................................................ 20
Section 12. Source of Funds................................................................................ 22
Section 13. Background of the Offer........................................................................ 22
Affiliation with the General Partner.................................................................... 22
Previous Tender Offer................................................................................... 23
Determination of Purchase Price......................................................................... 23
Section 14. Conditions of the Offer........................................................................ 28
Section 15. Certain Legal Matters.......................................................................... 29
General................................................................................................. 29
Antitrust............................................................................................... 29
Margin Requirements..................................................................................... 29
Section 16. Fees and Expenses.............................................................................. 29
Section 17. Miscellaneous.................................................................................. 29
SCHEDULE I - Transactions in the Units Effected by IPLP in the Past 60 Days...........................S-1
SCHEDULE II - Information Regarding the Managers of the Purchaser......................................S-2
SCHEDULE III - Information Regarding the Trustees and Executive Officers of IPT.........................S-3
SCHEDULE IV - Information Regarding the Directors and Executive Officers of Insignia...................S-5
SCHEDULE V - IPT Partnerships.........................................................................S-8
ii
TO THE LIMITED PARTNERS OF
CONSOLIDATED CAPITAL GROWTH FUND
INTRODUCTION
Madison River Properties, L.L.C. (the "Purchaser"), which is a
Delaware limited liability company and an affiliate of the General Partner (as
defined below), hereby offers to purchase up to 15,000 of the outstanding units
of limited partnership interest ("Units"), representing approximately 30% of
the Units outstanding in Consolidated Capital Growth Fund, a California limited
partnership (the "Partnership"), at a purchase price of $300 per Unit (the
"Purchase Price"), net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Assignment of Partnership Interest (which, together with any
supplements or amendments, collectively constitute the "Offer"). The Offer is
not conditioned on any aggregate minimum number of Units being tendered. A
Limited Partner may tender any or all of the Units owned by that Limited
Partner; provided, however, that because of restrictions in the Partnership's
Limited Partnership Agreement (the "Limited Partnership Agreement"), a partial
tender of Units must be for a minimum of five Units. Accordingly, any Limited
Partner that owns five or fewer Units must tender all or none of its Units.
Tenders of fractional Units will not be permitted, except by a Limited Partner
who is tendering all of the Units owned by that Limited Partner. The Purchaser
(which is an affiliate of the General Partner) will pay all charges and
expenses of Beacon Hill Partners, Inc., who will serve as the Purchaser's
information agent for the Offer (the "Information Agent"), and Xxxxxx Trust
Company of New York, who will act as depositary for the Offer (the
"Depositary").
The Purchaser; Affiliation with the General Partner. ConCap Equities,
Inc., which is the general partner of the Partnership (the "General Partner"),
is a wholly-owned subsidiary of Insignia Properties Trust, a Maryland real
estate investment trust ("IPT"). The Purchaser is a newly-formed, wholly-owned
subsidiary of Insignia Properties, L.P., a Delaware limited partnership
("IPLP"), which is the operating partnership of IPT. IPT is the sole general
partner of IPLP (owning approximately 66% of the total equity interests in
IPLP), and Insignia Financial Group, Inc., a Delaware corporation ("Insignia"),
is the sole limited partner of IPLP (owning approximately 34% of the total
equity interests in IPLP). Insignia and its affiliates also own approximately
67% of the outstanding common shares of IPT. Since late December 1994, Insignia
Residential Group, L.P. ("IRG"), which is an affiliate of the Purchaser and the
General Partner, has provided property management services to the Partnership,
and Insignia (directly or through affiliates) has performed asset management,
partnership administration and investor relations services for the Partnership.
By reason of these relationships, the General Partner has conflicts of interest
in considering the Offer. The General Partner has indicated in a Statement on
Schedule 14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange
Commission (the "Commission") that it is remaining neutral and making no
recommendation as to whether Limited Partners should tender their Units in
response to the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO
PURCHASE AND THE RELATED MATERIALS AND THE SCHEDULE 14D-9 CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS. See Sections 10
and 13.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser and the General Partner are affiliates of and
controlled by IPT, which is controlled by Insignia. The
General Partner has conflicts of interest in considering the
Offer, including (i) as a result of the fact that a sale or
liquidation of the Partnership's assets would result in a
decrease or elimination of the fees paid to the General
Partner and/or its affiliates and (ii) the fact that as a
consequence of the Purchaser's ownership of Units, the
Purchaser (which is an affiliate of the General Partner) may
have incentives to seek to maximize the value of its
ownership of Units, which in turn may result in a conflict
for the General Partner in attempting to reconcile the
interests of the Purchaser (which is an affiliate of the
General Partner) with the interests of the other Limited
Partners. See Section 10.
o The net liquidation value per Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) is $417.24. See Section 13
for a discussion of why the Purchaser (which is an affiliate
of the General Partner) believes that the Estimated
Liquidation Value is not necessarily indicative of the fair
market value of a Unit. THE PURCHASER (WHICH IS AN AFFILIATE
OF THE GENERAL PARTNER) MAKES NO REPRESENTATION AND EXPRESSES
NO OPINION AS TO THE FAIRNESS OR ADEQUACY OF THE PURCHASE
PRICE.
o As with any rational investment decision, the Purchaser
(which is an affiliate of the General Partner) is making the
Offer with a view to making a profit. Accordingly, there is a
conflict between the desire of the Purchaser (which is an
affiliate of the General Partner) to purchase Units at a low
price and the desire of the Limited Partners to sell their
Units at a high price.
o If the Purchaser is successful in acquiring more than
5,292.35 Units pursuant to the Offer, IPT (which is an
affiliate of the General Partner) will own in excess of 50%
of the total Units outstanding and, accordingly, will be able
to control the outcome of all voting decisions with respect
to the Partnership, including decisions concerning
liquidation, amendments to the Limited Partnership Agreement,
removal and replacement of the General Partner and mergers,
consolidations and other extraordinary transactions. Even if
the Purchaser acquires a lesser number of Units pursuant to
the Offer, however, because IPT already owns (through IPLP)
approximately 39.2% of the outstanding Units it will be able
to significantly influence the outcome of all voting
decisions with respect to the Partnership. This means that
(i) non-tendering Limited Partners could be prevented from
taking action they desire but that IPT (which is an affiliate
of the General Partner) opposes and (ii) IPT (which is an
affiliate of the General Partner) may be able to take action
desired by IPT but opposed by the non-tendering Limited
Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available
to Limited Partners wishing to sell their Units, there is no
formal trading market for Units. Moreover, the Purchaser
understands that the operations of the Chicago Partnership
Board, one of the leading partnership interest "auction"
intermediaries, have been suspended by securities regulators.
Accordingly, THE OFFER AFFORDS LIMITED PARTNERS AN
OPPORTUNITY TO DISPOSE OF THEIR UNITS FOR CASH WHICH
OTHERWISE MIGHT NOT BE AVAILABLE TO THEM.
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. The Purchase Price is approximately
7% greater than the highest reported secondary market sales
price of any Unit during the past six months (based on
published information and information provided by the General
Partner). However, reported secondary market sales prices do
not take into account commissions and transfer fees typically
payable by a Limited Partner in connection with a secondary
market sale. Therefore, the actual proceeds received by a
Limited Partner who sells Units in the secondary market are
typically significantly less than the reported sales prices.
o LIMITED PARTNERS WHO SELL UNITS PURSUANT TO THE OFFER WILL
NOT BE CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE
FROM 3% TO 10% OF THE SALES PRICE) OR PARTNERSHIP TRANSFER
FEES (WHICH ARE TYPICALLY $100 PER TRANSFER). The Purchaser
will pay all transfer fees imposed by the Partnership in
connection with sales of Units pursuant to the Offer.
o Real estate markets in the United States generally have
recovered and experienced an upward trend since the end of
the last recession. That recovery and upward trend might
continue. On the other hand, those markets also may be
adversely affected by a variety of factors, including
possible fluctuations in interest rates, economic slowdowns
and overbuilding. Accordingly, ownership of Units continues
to be a speculative investment. THE OFFER MAY PROVIDE LIMITED
PARTNERS WITH
2
THE OPPORTUNITY TO LIQUIDATE THEIR INTERESTS IN THE
PARTNERSHIP AND REPLACE THEM WITH INVESTMENTS THAT ARE LESS
SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to
avoid in the future the expenses, delays and complications in
filing personal income tax returns which may be caused by
ownership of Units. In addition, A LIMITED PARTNER WHO SELLS
100% OF ITS UNITS PURSUANT TO THE OFFER WILL NO LONGER BE
SUBJECT TO THE PASSIVE ACTIVITY LOSS LIMITATION WITH RESPECT
TO "SUSPENDED" LOSSES ATTRIBUTABLE TO THOSE UNITS AND,
THEREFORE, WILL BE ABLE TO UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who
have become disenchanted with real estate investments
generally, and in particular with the perceived illiquidity
of investments made through limited partnerships, because it
may afford an immediate opportunity for those Limited
Partners to liquidate their investments in the Partnership.
On the other hand, Limited Partners who tender their Units
will be giving up the opportunity to participate in any
potential future benefits represented by the ownership of
those Units, including, for example, the right to participate
in any future distributions of cash or property, whether from
operations, the proceeds of a sale or refinancing of one or
more of the Partnership's properties or in connection with
any future liquidation of the Partnership. Instead, any such
distributions of cash or property with respect to Units
tendered in the Offer and purchased by the Purchaser will be
paid to the Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Units and has been advised by the General Partner that the General
Partner also expects to make no recommendation. Each Limited Partner must make
its own decision, based on the Limited Partner's particular circumstances, as
to whether to tender Units and, if so, how many Units to tender. Limited
Partners should consult with their respective advisors regarding the financial,
tax, legal and other implications of accepting the Offer. LIMITED PARTNERS ARE
URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. If the
Purchaser (which is an affiliate of the General Partner) is successful in
acquiring more than 5,292.35 Units pursuant to the Offer, IPT will own in
excess of 50% of the total Units outstanding and, accordingly, will be able to
control the outcome of all votes by Limited Partners. Even if the Purchaser
acquires a lesser number of Units pursuant to the Offer, however, because IPT
already owns (through IPLP) approximately 39.2% of the outstanding Units it
will be able to significantly influence the outcome of all voting decisions
with respect to the Partnership. See Sections 8, 10 and 13.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Units sold over such
Limited Partner's adjusted tax basis in those Units. In the case of a Limited
Partner who is an individual and who has held Units since their issue by the
Partnership, the sale is expected to result in a gain, which may be taxable as
ordinary income or loss, capital gain or loss or gain from real estate
depreciation recapture. If a Limited Partner has suspended "passive losses"
from the Partnership or other passive activity investments, such Limited
Partner generally may deduct these losses up to the amount of any gain from the
sale. A sale pursuant to the Offer of all of a Limited Partner's Units will
terminate his or her investment in the Partnership and, commencing with the
year following the year of sale, the Limited Partner will no longer receive
Partnership tax information or have to report the complicated tax information
currently required of Limited Partners. See Section 6.
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives.
According to the Partnership's Prospectus dated February 25, 1977, the then
general partners (predecessors to the current General Partner) anticipated that
the Partnership would sell and/or refinance its properties three to seven years
after their acquisition, depending upon the then current real estate and
3
capital markets, economic climate and income tax consequences to the Limited
Partners. In general, the General Partner regularly evaluates the Partnership's
properties by considering various factors, such as the Partnership's financial
position and real estate and capital market conditions. The General Partner
monitors each property's specific locale and sub-market conditions evaluating
current trends, competition, new construction and economic changes. The General
Partner oversees each asset's operating performance and continuously evaluates
the physical improvement requirements. In addition, the financing structure for
each property, tax implications and the investment climate are all considered.
Any of these factors, and possibly others, could potentially contribute to any
decision of the General Partner to sell, refinance, upgrade with capital
improvements or hold a particular Partnership property. The Purchaser has been
advised that the General Partner intends to market Tahoe Springs Apartments in
Miami, Florida for sale sometime during 1998; however, there can be no
assurance that the General Partner will market the property as expected or that
such efforts will result in a sale of the property. Based on the above
considerations, and except for any potential sale of Tahoe Springs Apartments,
the General Partner has determined that it is not in the best interest of
Limited Partners to sell or refinance any other property at the present time.
Under the Limited Partnership Agreement the term of the Partnership will
continue until December 31, 2006, unless sooner terminated as provided in the
Limited Partnership Agreement or by law. Limited Partners could, as an
alternative to tendering their Units, take a variety of possible actions,
including voting to liquidate the Partnership or causing the Partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however. See
Section 14.
Distributions. The Partnership has made cash distributions of $133.28
per Unit to Limited Partners in 1997 (through December 19), and made cash
distributions to Limited Partners of $59.11 per Unit in 1996 and $466.38 per
Unit in 1995. Prior to the 1995 distribution, the last distribution made by the
Partnership was in 1990 ($40.25 per Unit). In total, original investors in the
Partnership have received distributions of $2,565.16 in respect of their
original $1,000 investment made in 1977. The 1997 and 1995 distributions were
not made primarily out of operating cash flow; rather, the 1997 distribution
consisted primarily of net proceeds from the refinancing of Tahoe Springs
Apartments in Miami, Florida (approximately $115 per Unit), and the 1995
distribution consisted primarily of net proceeds from the refinancing of three
of the Partnership's properties (approximately $323.00 per Unit). See Section
9. The Partnership is currently generating positive cash flow from operations,
and the Purchaser (which is an affiliate of the General Partner) believes that
the Partnership will continue to generate positive cash flow from operations,
depending upon the real estate and capital markets and general economic
conditions at the time. The potential for future distributions was considered
by the Purchaser (which is an affiliate of the General Partner) when
establishing the Purchase Price. Limited Partners who tender their Units in
response to the Offer will retain any distributions made through December 19,
1997, and will be entitled to receive and retain any subsequent distributions
made by the Partnership prior to the date on which the Purchaser pays for
tendered Units pursuant to the Offer, although any such subsequent distribution
will result in a reduction of the Purchase Price. See Section 1. However,
tendering Limited Partners will not be entitled to receive or retain any
distributions in respect of tendered Units which are made on or after the date
on which the Purchaser pays for such Units pursuant to the Offer, regardless of
the fact that the record date (as opposed to the payment date) for any such
distribution may be a date prior to the date of purchase. See Section 3.
Outstanding Units. According to information supplied by the
Partnership, as of December 1, 1997 there were 49,196 Units issued and
outstanding, which were held of record by 2,940 Limited Partners. IPLP
currently owns 19,305.65 Units. See Schedule I to this Offer to Purchase for a
list of transactions in the Units effected by IPLP within the past 60 days.
4
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 15,000 Units that are validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with the procedures set forth
in Section 4. For purposes of the Offer, the term "Expiration Date" shall mean
12:00 midnight, New York City time, on January 21, 1998, unless the Purchaser
(which is an affiliate of the General Partner) in its sole discretion shall
have extended the period of time for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date on which the
Offer, as extended by the Purchaser, shall expire. See Section 5 for a
description of the Purchaser's right to extend the period of time during which
the Offer is open and to amend or terminate the Offer.
THE PURCHASE PRICE WILL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER UNIT, IF ANY, MADE BY THE PARTNERSHIP TO LIMITED
PARTNERS ON OR AFTER DECEMBER 19, 1997 AND PRIOR TO THE DATE ON WHICH THE
PURCHASER PAYS FOR UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an affiliate
of the General Partner) increases the consideration offered to Limited Partners
pursuant to the Offer, the increased consideration will be paid for all Units
accepted for payment pursuant to the Offer, regardless of whether the Units
were tendered prior to the increase in the consideration offered.
If more than 15,000 Units are validly tendered prior to the Expiration
Date and not properly withdrawn prior to the Expiration Date in accordance with
the procedures specified in Section 4, the Purchaser (which is an affiliate of
the General Partner) will, upon the terms and subject to the conditions of the
Offer, accept for payment and pay for an aggregate of 15,000 of the Units so
tendered, pro rata according to the number of Units validly tendered by each
Limited Partner and not properly withdrawn on or prior to the Expiration Date,
with appropriate adjustments to avoid (i) purchases of fractional Units and
(ii) purchases that would violate Section 5.01 of the Limited Partnership
Agreement (which generally requires that a Limited Partner transfer a minimum
of five Units). If the number of Units validly tendered and not properly
withdrawn on or prior to the Expiration Date is less than or equal to 15,000
Units, the Purchaser (which is an affiliate of the General Partner) will
purchase all Units so tendered and not withdrawn, upon the terms and subject to
the conditions of the Offer.
If proration of tendered Units is required, then, subject to the
Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange Act of
1934 (the "Exchange Act") to pay Limited Partners the Purchase Price in respect
of Units tendered or return those Units promptly after the termination or
withdrawal of the Offer, the Purchaser (which is an affiliate of the General
Partner) does not intend to pay for any Units accepted for payment pursuant to
the Offer until the final proration results are known. NOTWITHSTANDING ANY SUCH
DELAY IN PAYMENT, NO INTEREST WILL BE PAID ON THE PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The Purchaser
(which is an affiliate of the General Partner) reserves the right (but in no
event shall be obligated), in its sole discretion, to waive any or all of those
conditions. If, on or prior to the Expiration Date, any or all of the
conditions have not been satisfied or waived, the Purchaser reserves the right
to (i) decline to purchase any of the Units tendered and terminate the Offer,
(ii) waive all of the unsatisfied conditions and, subject to complying with
applicable rules and regulations of the Commission, purchase all Units validly
tendered, (iii) extend the Offer and, subject to the right of Limited Partners
to withdraw Units until the Expiration Date, retain the Units that have been
tendered during the period or periods for which the Offer is extended, and/or
(iv) amend the Offer.
This Offer to Purchase and the related Assignment of Partnership
Interest are being mailed by the Purchaser (which is an affiliate of the
General Partner) to the persons shown by the Partnership's records to have been
Limited Partners or (in the case of Units owned of record by Individual
Retirement Accounts ("IRAs") and qualified plans) beneficial owners of Units as
of December 1, 1997.
5
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Units validly tendered and not withdrawn in
accordance with the procedures specified in Section 4, as promptly as
practicable following the Expiration Date. A tendering beneficial owner of
Units whose Units are owned of record by an IRA or other qualified plan will
not receive direct payment of the Purchase Price; rather, payment will be made
to the custodian of such account or plan. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of a properly completed and duly executed Assignment of Partnership
Interest and any other documents required by the Assignment of Partnership
Interest. See Section 3. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of the
General Partner) will be deemed to have accepted for payment pursuant to the
Offer, and thereby purchased, validly tendered Units if, as and when the
Purchaser (which is an affiliate of the General Partner) gives verbal or
written notice to the Depositary of the Purchaser's acceptance of those Units
for payment pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Units accepted for payment pursuant to the Offer will
be made by deposit of the Purchase Price with the Depositary, which will act as
agent for tendering Limited Partners for the purpose of receiving payments from
the Purchaser and transmitting those payments to Limited Partners whose Units
have been accepted for payment.
If any tendered Units are not purchased for any reason, the Assignment
of Partnership Interest with respect to such Units will be destroyed by the
Purchaser (which is an affiliate of the General Partner). If for any reason
acceptance for payment of, or payment for, any Units tendered pursuant to the
Offer is delayed or the Purchaser is unable to accept for payment, purchase or
pay for Units tendered pursuant to the Offer, then, without prejudice to the
Purchaser's rights under Section 14, the Depositary may, nevertheless, on
behalf of the Purchaser (which is an affiliate of the General Partner) retain
tendered Units, and those Units may not be withdrawn except to the extent that
the tendering Limited Partners are entitled to withdrawal rights as described
in Section 4; subject, however, to the Purchaser's obligation under Rule
14e-1(c) under the Exchange Act to pay Limited Partners the Purchase Price in
respect of Units tendered or return those Units promptly after termination or
withdrawal of the Offer.
The Purchaser (which is an affiliate of the General Partner) reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of the Purchaser's affiliates, the right to purchase Units tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering Limited Partners to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Units must be validly tendered and not withdrawn on or prior
to the Expiration Date. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest and any other documents required by
the Assignment of Partnership Interest must be received by the Depositary, at
its address set forth on the back cover of this Offer to Purchase, on or prior
to the Expiration Date. A Limited Partner may tender any or all of the Units
owned by that Limited Partner; provided, however, that because of restrictions
in the Limited Partnership Agreement, a partial tender of Units must be for a
minimum of five Units. Accordingly, any Limited Partner that owns five or fewer
Units must tender all or none of its Units. Tenders of fractional Units will
not be permitted, except by a Limited Partner who is tendering all of the Units
owned by that Limited Partner. No alternative, conditional or contingent
tenders will be accepted.
Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Units and payment is to be made directly
to that holder, then no signature guarantee is required on the Assignment of
Partnership Interest. Similarly, if the Units are tendered for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a
6
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Assignment
of Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE
ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION. Please contact the Information Agent for assistance in obtaining a
signature guarantee.
Delivery of Assignment of Partnership Interest. The method of delivery
of the Assignment of Partnership Interest and all other required documents is
at the option and risk of the tendering Limited Partner, and delivery will be
deemed made only when actually received by the Depositary. In all cases,
sufficient time should be allowed to assure timely delivery.
Appointment as Proxy; Power of Attorney. By executing an Assignment of
Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the General Partner), and its managers and
designees as the Limited Partner's proxies, in the manner set forth in the
Assignment of Partnership Interest, each with full power of substitution, to
the full extent of the Limited Partner's rights with respect to the Units
tendered by the Limited Partner and accepted for payment by the Purchaser
(which is an affiliate of the General Partner). Each such proxy shall be
considered coupled with an interest in the tendered Units. Such appointment
will be effective when, and only to the extent that, the Purchaser (which is an
affiliate of the General Partner) accepts the tendered Units for payment. Upon
such acceptance for payment, all prior proxies given by the Limited Partner
with respect to the Units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). The
Purchaser (which is an affiliate of the General Partner) and its managers and
designees will, as to those Units, be empowered to exercise all voting and
other rights of the Limited Partner as they in their sole discretion may deem
proper at any meeting of Limited Partners, by written consent or otherwise. The
Purchaser (which is an affiliate of the General Partner) reserves the right to
require that, in order for Units to be deemed validly tendered, immediately
upon the Purchaser's acceptance for payment of the Units, the Purchaser must be
able to exercise full voting rights with respect to the Units, including voting
at any meeting of Limited Partners then scheduled or acting by written consent
without a meeting.
By executing an Assignment of Partnership Interest, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and its
managers and designees as the Limited Partner's attorneys-in-fact, each with
full power of substitution, to the full extent of the Limited Partner's rights
with respect to the Units tendered by the Limited Partner and accepted for
payment by the Purchaser. Such appointment will be effective when, and only to
the extent that, the Purchaser accepts the tendered Units for payment. The
tendering Limited Partner agrees not to exercise any rights pertaining to the
tendered Units without the prior consent of the Purchaser. Upon such acceptance
for payment, all prior powers of attorney granted by the Limited Partner with
respect to such Units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the Purchaser
and its managers and designees each will have the power, among other things,
(i) to transfer ownership of such Units on the Partnership books maintained by
the General Partner (and execute and deliver any accompanying evidences of
transfer and authenticity any of them may deem necessary or appropriate in
connection therewith), (ii) upon receipt by the Depositary (as the tendering
Limited Partner's agent) of the Purchase Price, to become a substituted Limited
Partner, to receive any and all distributions made by the Partnership on or
after the date on which the Purchaser purchases such Units, and to receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Units in accordance with the terms of the Offer, (iii) to execute and deliver
to the General Partner a change of address form instructing the General Partner
to send any and all future distributions to which the Purchaser is entitled
pursuant to the terms of the Offer in respect of tendered Units to the address
specified in such form, and (iv) to endorse any check payable to or upon the
order of such Limited Partner representing a distribution to which the
Purchaser is entitled pursuant to the terms of the Offer, in each case in the
name and on behalf of the tendering Limited Partner.
Assignment of Interest in Future Distributions. By executing an
Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the General Partner) and its
assigns all of the right, title and interest of the Limited Partner in and to
any and all distributions made by the Partnership on or after the date on which
the Purchaser purchases such Units, in respect of the Units tendered by
7
such Limited Partner and accepted for payment by the Purchaser, regardless of
the fact that the record date for any such distribution may be a date prior to
the date of such purchase. The Purchaser will seek to be admitted to the
Partnership as a substituted Limited Partner upon consummation of the Offer.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Units pursuant to the Offer will be determined by the Purchaser
(which is an affiliate of the General Partner), in its sole discretion, which
determination shall be final and binding. The Purchaser (which is an affiliate
of the General Partner) reserves the absolute right to reject any or all
tenders of any particular Units determined by it not to be in proper form or if
the acceptance of or payment for those Units may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser (which is an affiliate of the
General Partner) also reserves the absolute right to waive or amend any of the
conditions of the Offer that it is legally permitted to waive as to the tender
of any particular Units and to waive any defect or irregularity in any tender
with respect to any particular Units of any particular Limited Partner. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Assignment of Partnership Interest and the Instructions thereto) will be
final and binding. No tender of Units will be deemed to have been validly made
until all defects and irregularities have been cured or waived. None of the
Purchaser (which is an affiliate of the General Partner), the Information
Agent, the Depositary or any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Units or
will incur any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, each tendering Limited Partner must provide the
Purchaser (which is an affiliate of the General Partner) with the Limited
Partner's correct taxpayer identification number by completing the Substitute
Form W-9 included in the Assignment of Partnership Interest. See the
Instructions to the Assignment of Partnership Interest and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Unit purchased, each tendering Limited Partner
must complete the FIRPTA Affidavit included in the Assignment of Partnership
Interest certifying the Limited Partner's taxpayer identification number and
address and that such Limited Partner is not a foreign person.
See the Instructions to the Assignment of Partnership Interest and Section 6.
Binding Obligation. A tender of Units pursuant to and in accordance
with the procedures described in this Section 3 and the acceptance for payment
of such Units will constitute a binding agreement between the tendering Limited
Partner and the Purchaser (which is an affiliate of the General Partner) on the
terms set forth in this Offer to Purchase and in the Assignment of Partnership
Interest.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Units pursuant to the Offer
are irrevocable, except that Units tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless already accepted
for payment as provided in this Offer to Purchase, may also be withdrawn at any
time after February 16, 1998. For withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Units to be withdrawn and must be signed by the person(s) who
signed the Assignment of Partnership Interest in the same manner as the
Assignment of Partnership Interest was signed (including signature guarantees
by an Eligible Institution). Units properly withdrawn will be deemed not to be
validly tendered for purposes of the Offer. Withdrawn Units may be re-tendered,
however, by following the procedures described in Section 3 at any time prior
to the Expiration Date.
If payment for Units is delayed for any reason or if the Purchaser
(which is an affiliate of the General Partner) is unable to pay for Units for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
tendered Units may be retained by the Depositary and may not be withdrawn
except to the extent that tendering Limited Partners are entitled to withdrawal
rights as set forth in this Section 4; subject, however, to the Purchaser's
8
obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Limited
Partners the Purchase Price in respect of Units tendered or return those Units
promptly after termination or withdrawal of the Offer.
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser (which is an
affiliate of the General Partner), in its sole discretion, which determination
shall be final and binding. None of the Purchaser, the Information Agent, the
Depositary or any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser (which is an affiliate of the General Partner) expressly reserves the
right, in its sole discretion, at any time and from time to time, (i) to extend
the period of time during which the Offer is open and thereby delay acceptance
for payment of, and the payment for, validly tendered Units, (ii) to terminate
the Offer and not accept for payment any Units not already accepted for payment
or paid for, (iii) upon the occurrence of any of the conditions specified in
Section 14, to delay the acceptance for payment of, or payment for, any Units
not already accepted for payment or paid for, and (iv) to amend the Offer in
any respect (including, without limitation, by increasing the consideration
offered, increasing or decreasing the number of Units being sought, or both).
Notice of any such extension, termination or amendment will be disseminated
promptly to Limited Partners in a manner reasonably designed to inform Limited
Partners of such change in compliance with Rule 14d-4(c) under the Exchange
Act. In the case of an extension of the Offer, the extension will be followed
by a press release or public announcement which will be issued no later than
9:00 a.m., New York City time, on the next business day after the then
scheduled Expiration Date, in accordance with Rule 14e-1(d) under the Exchange
Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Units) is delayed in its payment for Units or is unable to pay
for Units pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Units
and those Units may not be withdrawn except to the extent tendering Limited
Partners are entitled to withdrawal rights as described in Section 4; subject,
however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Limited Partners the Purchase Price in respect of Units
tendered or return those Units promptly after termination or withdrawal of the
Offer.
If the Purchaser (which is an affiliate of the General Partner) makes
a material change in the terms of the Offer or the information concerning the
Offer or waives a material condition of the Offer, the Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer will depend upon the
facts and circumstances, including the relative materiality of the change in
the terms or information. In the Commission's view, an offer should remain open
for a minimum of five business days from the date the material change is first
published, sent or given to securityholders, and if material changes are made
with respect to information that approaches the significance of price or the
percentage of securities sought, a minimum of ten business days may be required
to allow for adequate dissemination to securityholders and investor response.
As used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Units pursuant to the Offer.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations thereunder, administrative rulings,
practice and procedures and judicial authority, all as of the date of the
Offer. All of the foregoing are subject to change, and any such change could
affect the continuing accuracy of this summary. This summary does not discuss
all aspects of federal income taxation that may be relevant to a particular
Limited Partner in light of such Limited Partner's specific circumstances or to
certain types of Limited Partners subject to special treatment under the
federal income tax laws (for example,
9
foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor (except as otherwise expressly indicated) does
it describe any aspect of state, local, foreign or other tax laws. Sales of
Units pursuant to the Offer will be taxable transactions for federal income tax
purposes, and also may be taxable transactions under applicable state, local,
foreign and other tax laws. EACH LIMITED PARTNER SHOULD CONSULT ITS OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF
SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Limited Partner's "amount realized" on the sale and (ii) the
Limited Partner's adjusted tax basis in the Units sold. Generally, a Limited
Partner's adjusted tax basis with respect to a Unit equals its cost, increased
by the amount of income and the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit, and decreased by (i)
any distributions made with respect to such Unit, (ii) the amount of deductions
or losses allocated to the Unit and (iii) any decrease in the amount of
Partnership liabilities (as determined under Code Section 752) allocated to the
Unit. Thus, the amount of a Limited Partner's adjusted tax basis in tendered
Units will vary depending upon the Limited Partner's particular circumstances.
The "amount realized" with respect to a Unit will be a sum equal to the amount
of cash received by the Limited Partner for the Unit pursuant to the Offer,
plus the amount of the Partnership's liabilities allocable to the Unit (as
determined under Code Section 752). Limited Partners who purchased their Units
from the Partnership in the original issue of the Units are expected to
recognize taxable gain on the sale in an amount in excess of the cash purchase
price.
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held by
the Limited Partner as a capital asset. Under the Taxpayer Relief Act of 1997,
the capital gains rate for individuals and other non-corporate taxpayers is
reduced to 20% for sales of capital assets after July 28, 1997 if such assets
were held for more than 18 months. However, any gain from the sale of such
assets attributable to the recapture of depreciation with respect to real
property (as defined in Code Section 1250) is taxed at a maximum rate of 25%.
The 28% rate continues to apply to individual and noncorporate taxpayers who
sell a capital asset held for more than one year but not more than 18 months.
Corporate taxpayers are taxed at a maximum marginal rate of 35% for both
capital gains and ordinary income. The maximum marginal federal income tax rate
for ordinary income of individuals and other noncorporate taxpayers is 39.6%.
Capital losses are deductible only to the extent of capital gains, except that,
subject to the passive activity loss limitations discussed below, non-corporate
taxpayers may deduct up to $3,000 of capital losses in excess of the amount of
their capital gains against ordinary income. Excess capital losses generally
can be carried forward to succeeding years (a corporation's carryforward period
is five years and a non-corporate taxpayer can carry forward such losses
indefinitely); and a corporation is permitted to carry back excess capital
losses to the three preceding taxable years, provided the carryback does not
increase or produce a net operating loss for any of those years.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Limited Partnership
Agreement concerning transfers of Units. Such allocation and any cash
distributed by the Partnership to the Limited Partner for that year will affect
the Limited Partner's adjusted tax basis in Units and, therefore, the amount of
such Limited Partner's taxable gain or loss upon a sale of Units pursuant to
the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain realized by a Limited Partner is attributable to "unrealized
receivables" (which includes depreciation recapture) or "substantially
appreciated inventory" as defined in Code Section 751, then a portion of the
Limited Partner's gain or loss may be ordinary rather than capital and, in
addition, a portion of such gain may be taxed at the 25% rate discussed above.
A portion, if not all, of the gain upon the sale of Units is expected to be
attributable to unrealized receivables. A Limited Partner who tenders Units
which are purchased pursuant to the Offer must file an information statement
with such Limited Partner's federal income tax return for the year of the sale
which provides the information specified in Treasury Regulation ss.
1.751-1(a)(3). A selling Limited Partner also must notify the Partnership of
the
10
date of the transfer and the names, addresses and tax identification numbers of
the transferor(s) and transferee within 30 days of the date of the transfer
(or, if earlier, by January 15 of the following calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. A substantial portion of any post-1986 losses of
Limited Partners from the Partnership would have been passive losses. Thus,
Limited Partners may have "suspended" passive losses from the Partnership
(i.e., post-1986 net taxable losses in excess of statutorily permitted
"phase-in" amounts which have not been used to offset income from other passive
activities or from the Partnership). Substantially all gain from a sale of
Units pursuant to the Offer will be passive income.
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses, if any, can be currently deducted (subject to
other applicable limitations) to the extent of the Limited Partner's passive
income from the Partnership for that year (including any gain recognized on the
sale of Units) plus any other passive income for that year. If, on the other
hand, a Limited Partner sells 100% of its Units pursuant to the Offer, any
"suspended" losses will be offset first against any other net passive gain to
the Limited Partner from the sale of the Units and any other net passive
activity income from other passive activity investments, and the balance of any
"suspended" net losses from the Units will no longer be subject to the passive
activity loss limitation and, therefore, will be deductible by such Limited
Partner from its other income (subject to any other applicable limitations),
including ordinary income. If a tendering Limited Partner has suspended passive
losses from the Partnership, such Limited Partner must sell all of its Units to
receive these tax benefits. If more than 15,000 of the outstanding Units are
tendered, some tendering Limited Partners may not be able to sell 100% of their
Units pursuant to the Offer because of proration of the number of Units to be
purchased by the Purchaser. See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). In the event of a termination, the Partnership's tax year would close
and the Partnership would be treated for income tax purposes as if it had
contributed all of its assets and liabilities to a "new" partnership in
exchange for an interest in the "new" partnership. The Partnership would then
be treated as making a distribution of the interests in the "new" partnership
to the new partners and the remaining partners, followed by the liquidation of
the Partnership. Because the "new" partnership would be treated as having
acquired its assets on the date of the deemed contribution, a new depreciation
recovery period would begin on such date, the Partnership's annual depreciation
deductions over the next few years would be substantially reduced, and the
Partnership would have greater taxable income (or less tax loss) than if no tax
termination occurred. In addition, depreciation may be required to be allocated
to those Limited Partners that have a higher tax basis. A tax termination of
the Partnership would also terminate any partnership in which the Partnership
holds a majority interest (50% or more).
The Limited Partnership Agreement prohibits transfers of Units if a
transfer, when considered with all other transfers during the same applicable
twelve-month period, would cause a termination of the Partnership for tax
purposes. The Purchaser believes that even if the maximum number of Units is
purchased pursuant to the Offer, those transfers will not cause a tax
termination of the Partnership.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Units may be subject to 31% backup withholding unless those Limited
Partners provide a taxpayer identification number ("TIN") and certify that the
TIN is correct or properly certify that they are awaiting a TIN. A Limited
Partner may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Assignment of Partnership Interest.
If a Limited Partner who is subject to backup withholding does not properly
complete and sign the Substitute Form W-9, the Purchaser will withhold 31% from
payments to such Limited Partner.
11
Xxxx realized by a foreign Limited Partner on the sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under Code Section
1445, the transferee of an interest held by a foreign person in a partnership
which owns United States real property generally is required to deduct and
withhold a tax equal to 10% of the amount realized on the disposition. In order
to comply with this requirement, the Purchaser will withhold 10% of the amount
realized by a tendering Limited Partner unless the Limited Partner properly
completes and signs the FIRPTA Affidavit included as part of the Assignment of
Partnership Interest certifying the Limited Partner's TIN and address, and that
such Limited Partner is not a foreign person. Amounts withheld would be
creditable against a foreign Limited Partner's federal income tax liability
and, if in excess thereof, a refund could be obtained from the Internal Revenue
Service by filing a U.S. income tax return.
SECTION 7. EFFECTS OF THE OFFER.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of Units if a transfer, when considered with all other transfers
during the same applicable twelve-month period, would cause a termination of
the Partnership for federal or any applicable state income tax purposes. This
provision may limit sales of Units in the secondary market and in private
transactions for the twelve-month period following completion of the Offer. The
General Partner has advised the Purchaser that the Partnership will not process
any requests for recognition of substitution of Limited Partners upon a
transfer of Units during such twelve-month period which the General Partner
believes may cause a tax termination in contravention of the Limited
Partnership Agreement. In determining the number of Units for which the Offer
is made (representing approximately 30% of the outstanding Units if 15,000
Units are tendered), the Purchaser (which is an affiliate of the General
Partner) took this restriction into account so as to permit normal historical
levels of transfers to occur following the transfers of Units pursuant to the
Offer without violating this restriction.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Units are purchased pursuant to the
Offer, the result will be a reduction in the number of Limited Partners. In the
case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Units and,
therefore, the Purchaser (which is an affiliate of the General Partner) does
not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for their
Units through secondary market transactions. See Section 13 for certain limited
information regarding recent secondary market sales of the Units.
The Units are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser (which is an affiliate of the General Partner) does not
expect or intend that consummation of the Offer will cause the Units to cease
to be registered under Section 12(g) of the Exchange Act. If the Units were to
be held by fewer than 300 persons, the Partnership could apply to de-register
the Units under the Exchange Act. Because the Units are widely held, however,
the Purchaser (which is an affiliate of the General Partner) believes that,
even if it purchases the maximum number of Units in the Offer, after that
purchase the Units will be held of record by more than 300 persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser may have the right to vote each Unit purchased
in the Offer pursuant to the irrevocable appointment by tendering Limited
Partners of the Purchaser and its managers and designees as proxies with
respect to the Units tendered by such Limited Partners and accepted for payment
by the Purchaser. See Section 3. If the Purchaser (which is an affiliate of the
General Partner) is successful in acquiring more than 5,292.35 Units pursuant
to the Offer (or otherwise), IPT (which controls the General Partner, IPLP and
the Purchaser) will own
12
in excess of 50% of the total outstanding Units and, as a result, will be able
to control the outcome of all voting decisions with respect to the Partnership.
Even if the Purchaser acquires a lesser number of Units pursuant to the Offer,
however, because IPT already owns (through IPLP) approximately 39.2% of the
outstanding Units, it will be able to significantly influence the outcome of
all voting decisions with respect to the Partnership. In general, IPLP and the
Purchaser (which are affiliates of the General Partner) will vote the Units
owned by them in whatever manner they deem to be in the best interest of IPT,
which, because of their relationship with the General Partner, also may be in
the interest of the General Partner, but may not be in the interest of other
Limited Partners. This could (i) prevent non-tendering Limited Partners from
taking action they desire but that IPT opposes and (ii) enable IPT to take
action desired by IPT but opposed by non-tendering Limited Partners. Under the
Limited Partnership Agreement, Limited Partners holding a majority of the Units
are entitled to take action with respect to a variety of matters, including:
removal of a general partner and in certain circumstances election of new or
successor general partners; dissolution of the Partnership; the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement.
The Offer will not result in any change in the compensation payable to
the General Partner or its affiliates. However, as a result of the Offer, the
Purchaser (which is an affiliate of the General Partner) will participate, in
its capacity as a Limited Partner, in any subsequent distributions to Limited
Partners to the extent of the Units purchased pursuant to the Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the General Partner), is
seeking to acquire Units pursuant to the Offer in order to increase its equity
interest in the Partnership, primarily for investment purposes and with a view
to making a profit. Following the completion of the Offer, IPT and/or persons
related to or affiliated with it may acquire additional Units. Any such
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable. Any such
acquisition may be at a price higher or lower than the price to be paid for the
Units purchased pursuant to the Offer, and may be for cash or other
consideration. Insignia and IPT (which are affiliates of the General Partner)
also may consider disposing of some or all of the Units the Purchaser acquires
pursuant to the Offer, either directly or by a sale or other disposition of one
or more interests in IPT or IPLP, depending among other things on the
requirements from time to time of Insignia, IPT and their affiliates in light
of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to a liquidation of
the Partnership or a sale of assets or refinancing of any of the Partnership's
properties. However, IPT and the Purchaser expect that consistent with the
General Partner's fiduciary obligations, the General Partner will seek and
review opportunities (including opportunities identified by IPT and the
Purchaser) to engage in transactions which could benefit the Partnership, such
as sales or refinancings of assets or a combination of the Partnership with one
or more other entities, with the objective of seeking to maximize returns to
Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as part
of a complete liquidation; and (iv) mergers or other consolidation transactions
involving the Partnership. Any such merger or consolidation transaction could
involve other limited partnerships in which the General Partner or its
affiliates serve as general partners, or a combination of the Partnership with
one or more existing, publicly traded entities (including, possibly, affiliates
of IPT (which is an affiliate of the General Partner) or IPT itself), in any of
which Limited Partners might receive cash, common stock or other securities or
consideration. There is no assurance, however, as to when or whether any of the
transactions referred to above might occur. If any such transaction is effected
by the Partnership and financial benefits accrue to the Limited Partners of the
Partnership, the Purchaser (and thus IPT) will participate in those benefits to
the extent of its ownership of Units. A merger or other consolidation
transaction and certain kinds of other extraordinary transactions would require
a vote of the Limited Partners, and, if the Purchaser is successful in
acquiring more than 5,292.35 Units pursuant to the Offer (or otherwise), IPT
will be able to control the outcome
13
of any such vote. Even if the Purchaser acquires a lesser number of Units
pursuant to the Offer, however, because IPT already owns (through IPLP)
approximately 39.2% of the outstanding Units it will be able to significantly
influence the outcome of all voting decisions with respect to the Partnership.
IPT's primary objective in seeking to acquire the Units through the Purchaser
pursuant to the Offer is not, however, to influence the vote on any particular
transaction, but rather to generate a profit on the investment represented by
those Units.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Except as
otherwise indicated, information contained in this Section 9 is based upon
documents and reports publicly filed by the Partnership with the Commission.
Although the Purchaser has no information that any statements contained in this
Section 9 are untrue, the Purchaser cannot take responsibility for the accuracy
or completeness of any information contained in this Section 9 which is derived
from such public documents, or for any failure by the Partnership to disclose
events which may have occurred and may affect the significance or accuracy of
any such information but which are unknown to the Purchaser.
General. The Partnership was organized on December 20, 1976 under the
laws of the State of California. Its principal executive offices are located at
Xxx Xxxxxxxx Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its
telephone number at that address is (000) 000-0000.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was formed to acquire, own, operate,
improve, lease and otherwise manage for investment purposes a diversified
portfolio of improved, income producing properties.
The Partnership's investment portfolio currently consists of four
residential apartment complexes: a 294- unit complex in Louisville, Kentucky; a
385-unit complex in Louisville, Kentucky; a 600-unit complex in Raleigh, North
Carolina; and a 368-unit complex in Miami, Florida.
Originally Anticipated Term of Partnership; Alternatives. According to
the Partnership's Prospectus dated February 25, 1977, the then general partners
(predecessors to the current General Partner) anticipated that the Partnership
would sell and/or refinance its properties three to seven years after their
acquisition, depending upon the then current real estate and money markets,
economic climate and income tax consequences to the Limited Partners. Under the
Limited Partnership Agreement, the term of the Partnership will continue until
December 31, 2006, unless sooner terminated as provided in the Limited
Partnership Agreement or by law. Limited Partners could, as an alternative to
tendering their Units, take a variety of possible actions including voting to
liquidate the Partnership or causing the Partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market conditions.
The General Partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and
economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement requirements.
In addition, the financing structure for each property, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision of the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. The Purchaser has been advised that the General Partner
intends to market Tahoe Springs Apartments in Miami, Florida for sale sometime
during 1998; however, there can be no assurance that the General Partner will
market the property as expected or that such efforts will result in the sale of
the property. There are no other plans to sell or refinance any property at the
present time.
Selected Financial and Property-Related Data. Set forth below is a
summary of certain financial and statistical information with respect to the
Partnership and its properties, all of which has been excerpted or derived from
the Partnership's Annual Reports on Form 10-KSB for the years ended December
31, 1996 and 1995, and a Form 10-K for the years ended December 31, 1994, 1993
and 1992 and the Partnership's Quarterly Reports on Form 10-QSB for the periods
ended September 30, 1997 and 1996. More comprehensive financial and other
14
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.
CONSOLIDATED CAPITAL GROWTH FUND
SELECTED FINANCIAL DATA
(in thousands, except Unit data)
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- ---------- -------
(UNAUDITED)
Statements of Operations Data:
Rental Income................. $ 8,061 $ 7,905 $10,531 $10,300 $13,384 $12,922 $11,992
Other Income.................. $ 559 $ 593 $ 782 $ 4,826 $ 420 $ 447 $ 395
Total Revenues............. $ 8,620 $ 8,498 $11,313 $15,126 $13,804 $13,369 $12,387
Income (Loss) from Operations
(before extraordinary item) $ 882 $ 866 $ 1,111 $ 5,058 $ 2,491 $ (142) $(1,823)
Net Income (Loss)............. $ 882 $ 747 $ 992 $ 5,079 $ 4,495 $ (750) $(1,918)
Net Income (Loss) per Unit.... $ 17.75 $ 15.02 $ 19.96 $102.21 $ 90.46 $(15.09) $(38.60)
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
----------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- ---------- -------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $24,237 $24,567 $30,422 $27,733 $34,123 $37,735 $42,734
Total Liabilities............. $32,053 $26,020 $31,630 $26,943 $12,803 $20,910 $25,159
Limited Partners' Equity
(Deficit).................... $(3,553) $ 1,889 $ 2,131 $ 4,057 $21,973 $17,523 $18,265
Units Outstanding............. 49,196 49,196 49,196 49,196 49,196 49,196 49,196
Book Value per Unit........... $(72.22) $ 38.40 $ 43.32 $ 82.47 $446.64 $356.19 $371.27
Description of Properties. Set forth below is a table showing the
location, the date of purchase, the nature of the Partnership's ownership
interest in and the use of each of the Partnership's properties.
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
------------------------------ ---------- ----------------------------- ----------------------
Breckinridge Square Apartments 10/78 Fee ownership Residential Apartments
Louisville, Kentucky (subject to first mortgage) (294 Units)
Xxxxxxxxx Park Apartments 05/90 Fee ownership Residential Apartments
Louisville, Kentucky (subject to first mortgage) (385 Units)
The Lakes Apartments 05/88 Fee ownership Residential Apartments
Raleigh, North Carolina (subject to first mortgage) (600 Units)
Tahoe Springs Apartments 11/87 Fee ownership Residential Apartments
Miami, Florida (subject to first mortgage) (368 Units)
15
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value, accumulated depreciation and federal tax basis of
each of the Partnership's properties as of December 31, 1996 ($ amounts in
thousands).
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
-------------------------------------- ------------ --------------- --------------- ---------- ----------
Breckinridge Square Apartments $ 7,478 $ 5,247 5-22 yrs. S/L $ 2,524
Xxxxxxxxx Park Apartments 8,069 3,322 5-20 yrs. S/L 4,301
The Lakes Apartments 13,865 6,972 5-19 yrs. S/L 8,899
Tahoe Springs Apartments 11,693 5,142 5-20 yrs. S/L 8,486
--------- --------- ---------
TOTALS $ 41,105 $ 20,683 $ 24,210
========= ========= =========
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1996 ($ amounts in thousands).
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1996 RATE AMORTIZED DATE MATURITY
------------------------------------ --------------- ------------- --------------- --------------- -------------
Breckinridge Square Apartments
1st Mortgage $ 6,000 6.95% (1) 12/1/05 $ 6,000
Xxxxxxxxx Park Apartments
1st Mortgage 6,450 6.95% (1) 12/1/05 6,450
The Lakes Apartments
1st Mortgage 12,240 6.95% (1) 12/1/05 12,240
Tahoe Springs Apartments
1st Mortgage 6,000 7.33% (1) 11/1/03 6,000
------- --------
TOTALS $30,690 $30,690
======= ========
(1) Payments are interest only.
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for each of
the Partnership's properties during the past two years.
PROPERTY AVERAGE ANNUAL RENTAL RATE AVERAGE ANNUAL OCCUPANCY
------------------------------ ---------------------------------- -------------------------
1996 1995 1996 1995
------------ ------------ ---- ----
Breckinridge Square Apartments $ 6,895/unit $ 6,617/unit 93% 93%
Xxxxxxxxx Park Apartments $ 6,313/unit $ 6,094/unit 93% 94%
The Lakes Apartments $ 6,801/unit $ 6,503/unit 94% 93%
Tahoe Springs Apartments $ 7,476/unit $ 7,227/unit 95% 94%
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1996 for each of the Partnership's
properties.
1996 1996
PROPERTY BILLING RATE
------------------------------ ---------- ----
Breckinridge Square Apartments $ 95,000 0.59%
Xxxxxxxxx Park Apartments $ 85,000 0.94%
The Lakes Apartments $ 158,000 1.24%
Tahoe Springs Apartments $ 250,000 2.27%
Other Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial
16
results and other matters. Such reports and other documents may be inspected at
the Commission's Public Reference Section, Room 1024, 000 Xxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000, where copies may be obtained at prescribed rates, and
at the regional offices of the Commission located in the Citicorp Center, 000
Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, and 7 World Trade
Center, New York, New York 10048. Copies should be available by mail upon
payment of the Commission's customary charges by writing to the Commission's
principal offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. The
Commission also maintains a web site that contains reports, proxy and other
information filed electronically with the Commission, the address of which is
xxxx://xxx.xxx.xxx.
Cash Distributions History. The Partnership has made cash distributions of
$133.28 per Unit to Limited Partners in 1997 (through December 19), and made
cash distributions to Limited Partners of $59.11 per Unit in 1996 and $466.38
per Unit in 1995. Prior to the 1995 distribution, the last distribution made by
the Partnership was in 1990 ($40.25 per Unit). In total, original investors in
the Partnership have received distributions of $2,565.16 in respect of their
original $1,000 investment made in 1977. The 1997 and 1995 distributions were
not made primarily out of operating cash flow; rather, the 1997 distribution
consisted primarily of net proceeds from the refinancing of Tahoe Springs
Apartments in Miami, Florida (approximately $115 per Unit), and the 1995
distribution consisted primarily of net proceeds from the refinancing of three
of the Partnership's properties (approximately $323.00 per Unit).
Operating Budgets of the Partnership. A summary of the fiscal 1996 and 1997
operating budgets and the audited results of operations for fiscal 1996 of the
Partnership are set forth in the table below. The budgeted amounts provided
below are figures that were not computed in accordance with generally accepted
accounting principles ("GAAP"). Historically, budgeted operating results of
operations for a particular fiscal year have differed significantly in certain
respects from the audited operating results for that year. In particular, items
that are categorized as capital expenditures for purposes of preparing the
operating budgets are often re-categorized as expenses when the financial
statements are audited and presented in accordance with GAAP. Therefore, the
summary operating budgets presented for fiscal 1997 should not necessarily be
considered as indicative of what the audited operating results for fiscal 1997
will be. Furthermore, any estimate of the future performance of a business,
such as the Partnership's business, is forward-looking and based on numerous
assumptions, some of which inevitably will prove to be incorrect. For this
reason, it is probable that the Partnership's future operating results will
differ from those projected in the operating budget, and those differences may
be material. Therefore, such information should not be relied on by Limited
Partners.
FISCAL 1996 FISCAL 1996 FISCAL 1997
BUDGETED AUDITED BUDGETED
------------- ------------- -------------
Total Revenues from Property Operations................... $ 11,007,155 $ 11,313,000 $ 11,561,786
Total Operating Expenses ................................. $ 5,662,848 $ 5,768,000 $ 5,644,766
Net Operating Income...................................... $ 5,344,307 $ 5,545,000 $ 5,917,020
Capital Expenditures...................................... $ 1,029,367 $ 1,302,000 $ 1,233,927
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives to
seek to maximize the value of its ownership of Units, which in turn may result
in a conflict for the General Partner in attempting to reconcile the interests
of the Purchaser (which is an affiliate of the General Partner) with the
interests of the other Limited Partners. In addition, the Purchaser (which is
an affiliate of the General Partner) is making the Offer with a view to making
a profit. Accordingly, there is a conflict between the desire of the Purchaser
(which is an affiliate of the General Partner) to purchase Units at a low price
and the desire of the Limited Partners to sell their Units at a high price. The
General Partner has indicated in the
17
Schedule 14D-9 that it is remaining neutral and making no recommendation as to
whether Limited Partners should tender their Units pursuant to the Offer.
LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE SCHEDULE
14D-9 AND THE RELATED MATERIALS CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING
WHETHER TO TENDER THEIR UNITS.
Voting by the Purchaser. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser may have the right to vote each Unit purchased
in the Offer pursuant to the irrevocable appointment by tendering Limited
Partners of the Purchaser (which is an affiliate of the General Partner) and
its managers and designees as proxies with respect to the Units tendered by
such Limited Partners and accepted for payment by the Purchaser. See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is successful
in acquiring more than 5,292.35 Units pursuant to the Offer (or otherwise), IPT
(which controls the General Partner, IPLP and the Purchaser) will own in excess
of 50% of the total outstanding Units and, as a result, will be able to control
the outcome of all voting decisions with respect to the Partnership. Even if
the Purchaser acquires a lesser number of Units pursuant to the Offer, however,
because IPT already owns (through IPLP) approximately 39.2% of the outstanding
Units it will be able to significantly influence the outcome of all voting
decisions with respect to the Partnership. In general, IPLP and the Purchaser
(which are affiliates of the General Partner) will vote the Units owned by them
in whatever manner they deem to be in IPT's best interest, which, because of
their relationship with the General Partner, also may be in the interest of the
General Partner, but may not be in the interest of other Limited Partners. This
could (i) prevent nontendering Limited Partners from taking action they desire
but that IPT opposes and (ii) enable IPT to take action desired by IPT but
opposed by non-tendering Limited Partners. Under the Limited Partnership
Agreement, Limited Partners holding a majority of the Units are entitled to
take action with respect to a variety of matters, including: removal of a
general partner and in certain circumstances election of new or successor
general partners; dissolution of the Partnership; the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Units it purchases pursuant to the
Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand to make such contributions. See Section 12. It
is possible, however, that in connection with its future financing activities,
IPT or IPLP may cause or request the Purchaser (which is an affiliate of the
General Partner) to pledge the Units as collateral for loans, or otherwise
agree to terms which provide IPT, IPLP and the Purchaser with incentives to
generate substantial near-term cash flow from the Purchaser's investment in the
Units. This could be the case, for example, if a loan has a "balloon" maturity
after a relatively short time or bears a high or increasing interest rate. In
such a situation, the General Partner may experience a conflict of interest in
seeking to reconcile the best interests of the Partnership with the need of its
affiliates for cash flow from the Partnership's activities.
Transactions with Affiliates. Under the Limited Partnership Agreement,
the General Partner holds an interest in the Partnership and is entitled to
participate in certain cash distributions made by the Partnership to its
partners. The General Partner received from the Partnership in respect of its
interest in the Partnership cash distributions of $933,000 to date in 1997,
$82,000 in 1996 and $2,665,000 in 1995. In late December 1994, IRG (which is an
affiliate of the Purchaser and the General Partner) assumed day-to-day property
management responsibilities for the Partnership's properties. The Partnership
paid IRG property management fees for property management services in the
amounts of approximately $554,000 and $536,000 for the years ended December 31,
1996 and 1995, respectively, and has paid IRG property management fees equal to
$423,000 during the first nine months of 1997. The Partnership reimbursed the
General Partner and its affiliates (including Insignia) for expenses incurred
in connection with asset management and partnership administration services
performed by them for the Partnership during 1996 and 1995 in the amounts of
$269,000 (including reimbursement of $15,000 paid to an affiliate of the
General Partner for costs incurred in connection with construction oversight
services) and $227,000,
18
respectively, and has reimbursed them for such services in the amount of
$141,000 through September 30, 1997. Pursuant to the Limited Partnership
Agreement, the General Partner is entitled to receive a partnership management
fee equal to 9% of the Partnership's adjusted cash from operations, as and when
cash from operations is distributed to the Limited Partners. The fees paid to
the General Partner pursuant to this provision were $213,000 in 1996, $613,000
in 1995 and $82,000 for the nine months ended September 30, 1997. On July 1,
1995, the Partnership began insuring its properties under a master policy
through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the General Partner who
receives payments on these obligations from the agent. Insignia and the General
Partner believe that the aggregate financial benefit derived by Insignia and
its affiliates from the arrangement described in the three preceding sentences
has been immaterial.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of making the Offer. The Purchaser is a wholly-owned subsidiary of
IPLP. The Purchaser (which is an affiliate of the General Partner) has not
engaged in any business activity other than in connection with the Offer and
certain other tender offers for units of limited partnership interests in other
IPT Partnerships (as defined below) being made contemporaneously with the
Offer, and has no significant assets or liabilities at the present time. Upon
consummation of the Offer and such other offers, the Purchaser's only
significant assets will be the Units it acquires pursuant to the Offer and the
other limited partnership units it acquires pursuant to such other offers.
The principal executive offices of the Purchaser (which is an
affiliate of the General Partner) are located at One Insignia Financial Plaza,
P.O. Box 19059, Greenville, South Carolina 29602, and its telephone number is
(000) 000-0000. For certain information concerning the managers of the
Purchaser (which is an affiliate of the General Partner), see Schedule II to
this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996 for the purpose
of acquiring and owning interests in multifamily residential properties,
principally through ownership of limited and general partner interests in real
estate limited partnerships (including the Partnership). IPT has been organized
and operates in a manner that will qualify it to be taxed as a real estate
investment trust ("REIT") under the Code. Substantially all of IPT's
investments are held through IPLP, which is the operating partnership of IPT.
IPT is presently the sole general partner and Insignia is presently the sole
limited partner of IPLP.
In forming IPT, Insignia and its affiliates (i) transferred to IPT
equity interests in entities comprising or controlling the general partners of
36 public real estate limited partnerships (including the Partnership) (the
"IPT Partnerships") in exchange for common shares of beneficial interest of IPT
and (ii) transferred to IPLP limited partner interests in the IPT Partnerships
(or equity interests in entities owning limited partner interests in the IPT
Partnerships) in exchange for units of limited partner interest in IPLP. The
IPT Partnerships own, in the aggregate, 184 properties containing approximately
42,000 residential apartment units and approximately 4.2 million square feet of
commercial space. See Schedule V for a list of the IPT Partnerships.
IPT does not currently operate as a self-administered and self-managed
REIT, but rather has engaged Insignia to act as advisor to IPT and IPLP. In
such capacity, Insignia and its affiliates provide a broad range of services to
IPT and IPLP, including executive advisory, investment advisory, acquisition,
administrative, financial and accounting services, including in connection with
the Offer.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which is an
affiliate of Insignia) and Angeles Mortgage Investment Trust, an unincorporated
California business trust ("AMIT"), entered into a definitive merger agreement
(the "AMIT Merger Agreement"), pursuant to which AMIT is to be merged with and
into IPT, with IPT being the surviving entity, in a stock for stock transaction
(the "AMIT Merger"). XXXX is a public company whose Class A shares trade on the
American Stock Exchange under the symbol ANM. Insignia and its affiliates
currently
19
own 96,800 (or approximately 3.7%) of the 2,617,000 outstanding AMIT Class A
shares and all of the 1,675,113 outstanding AMIT Class B shares. If the AMIT
Merger is consummated, IPT will become a publicly traded company (IPT presently
intends to apply for listing of its shares on the New York Stock Exchange,
which listing would be subject to completion of the AMIT Merger), and it is
anticipated that Insignia and its affiliates will own approximately 56% of
post-merger IPT, the former AMIT shareholders (other than Insignia and its
affiliates) will own approximately 17% of post-merger IPT, and the current
unaffiliated shareholders of IPT will own the remaining 27% of post-merger IPT.
The XXXX Xxxxxx is expected to be completed in the first quarter of
1998. Consummation of the AMIT Merger is subject to several conditions,
including approval of the AMIT Merger Agreement and the AMIT Merger by the
respective shareholders of IPT and XXXX and the receipt by AMIT of a fairness
opinion from its financial advisor to the effect that the AMIT Xxxxxx is fair
to AMIT's shareholders from a financial point of view. Accordingly, there can
be no assurance as to when the AMIT Merger will occur, or that it will occur at
all.
IPT's principal executive offices are located at One Insignia
Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and its
telephone number is (000) 000-0000. For certain information concerning the
trustees and executive officers of IPT, see Schedule III to this Offer to
Purchase. IPLP does not have any officers or employees.
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
INSIGNIA PROPERTIES TRUST SELECTED
CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except share and unit data)
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------- ------------
(unaudited) (audited)
Statements of Operations Data:
Revenues.................................................................. $ 11,144 $ 9,705
Income Before Extraordinary Item.......................................... $ 2,930 $ 3,557
Net Income................................................................ $ 2,930 $ 2,425
Supplemental Data:
Funds From Operations(1).................................................. $ 14,324 $ 12,563
IPT Common Shares Outstanding............................................. 13,449,712 11,168,036
IPLP Units Outstanding.................................................... 8,399,499 8,399,499
---------- ----------
IPT Common Shares and IPLP Units Outstanding(2)........................... 21,849,211 19,567,535
========== ==========
Balance Sheets Data:
Cash...................................................................... $ 53,897 $ 4,928
Investments in IPT Partnerships(3)........................................ $ 126,505 $ 118,741
Long-Term Debt............................................................ $ 19,300 $ 19,730
Shareholders' Equity(4)................................................... $ 138,710 $ 121,068
(1) Funds from Operations represent income or loss from real estate operations,
which is net income or loss in accordance with GAAP, excluding gains or
losses from debt restructuring or sales of property, plus depreciation and
provision for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) Represents IPT's investment in 26 of the 36 IPT Partnerships which IPT
accounts for using the equity method. Of the remaining ten IPT
Partnerships, IPT accounts for nine using the cost method and one using the
consolidation method.
(4) Includes Insignia's investments in predecessor entities.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of commercial
properties. Insignia's real estate services include property management,
providing all of the day-to-day services
20
necessary to operate a property, whether residential or commercial; asset
management, including long-term financial planning, monitoring and implementing
capital improvement plans, and development and execution of refinancings and
dispositions; real estate leasing and brokerage; maintenance and construction
services; marketing and advertising; investor reporting and accounting; and
investment banking, including assistance in workouts and restructurings,
mergers and acquisitions, and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 2,600 properties, which include approximately 290,000 residential
units (including cooperative and condominium units), and in excess of 150
million square feet of retail, commercial and industrial space, located in over
500 cities in 48 states. Insignia currently provides partnership administration
services to approximately 900 limited partnerships having approximately 330,000
limited partners. Insignia is a public company whose stock is traded on the New
York Stock Exchange under the symbol IFS.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Certain information, as of
particular dates, concerning Insignia's business, principal properties, capital
structure, material pending legal proceedings, operating results, financial
condition, directors and officers (including their remuneration and stock
options granted to them), the principal holders of Insignia's securities, any
material interests of such persons in transactions with Insignia and certain
other matters is required to be disclosed in proxy statements and annual
reports distributed to Insignia's shareholders and filed with the Commission.
Such reports, proxy statements and other information may be inspected and
copied at the Commission's public reference facilities and should also be
available for inspection in the same manner as set forth with respect to the
Partnership in Section 9.
Insignia's principal executive offices are located at Xxx Xxxxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its telephone number is
(000) 000-0000. For certain information concerning the directors and executive
officers of Insignia, see Schedule IV to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1996, 1995 and 1994 and the nine-month periods ended
September 30, 1997 and 1996. More comprehensive financial and other information
is included in Insignia's Annual Report on Form 10-K for the year ended
December 31, 1996 (including management's discussion and analysis of financial
condition and results of operations) and in other reports and documents filed
by Insignia with the Commission. The financial information set forth below is
qualified in its entirety by reference to such reports and documents filed with
the Commission and the financial statements and related notes contained
therein. These reports and other documents may be examined and copies thereof
may be obtained in the manner set forth above.
21
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(unaudited)
Statements of Operations Data:
Total Revenues.................................. $ 254,630 $ 149,204 $ 227,074 $ 123,032 $ 75,453
Income Before Taxes and Extraordinary Item...... $ 7,879 $ 8,097 $ 14,946 $ 10,093 $ 12,101
Net Income...................................... $ 4,727 $ 5,020 $ 8,564 $ 5,806 $ 7,261
Earnings Per Share.............................. $ 0.15 $ 0.15 $ 0.27 $ 0.20 $ 0.35
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------------------
1997 1996 1996 1995 1994
-------- ------- --------- ------ -------
(unaudited)
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 89,427 $ 60,131 $ 54,614 $ 49,846 $ 36,596
Receivables..................................... $ 73,657 $ 14,292 $ 46,040 $ 26,445 $ 13,572
Total Assets................................ $ 568,768 $ 471,889 $ 492,402 $ 245,409 $ 174,272
Accounts Payable................................ $ 8,767 $ 2,602 $ 1,711 $ 1,497 $ 3,478
Commissions Payable............................. $ 30,841 $ 9,257 $ 18,736 $ 602 --
Accrued and Sundry Liabilities.................. $ 50,893 $ 24,604 $ 40,741 $ 25,619 $ 18,790
Long-Term Debt.................................. $ 58,417 $ 205,590 $ 69,140 $ 42,996 $ 73,198
Total Liabilities........................... $ 148,918 $ 255,714 $ 130,328 $ 70,714 $ 95,466
Redeemable Convertible Preferred Stock.......... -- -- -- $ 15,000 --
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 143,993 -- $ 144,169 -- --
Minority Interest in Consolidated Subsidiaries.. $ 52,778 $ 2,762 -- $ 2,682 --
Shareholders' Equity........................ $ 223,079 $ 213,413 $ 217,905 $ 157,013 $ 78,806
Except as otherwise set forth herein and in Schedule I, none of the
Purchaser (which is an affiliate of the General Partner), IPLP, IPT, Insignia
or, to the best of the Purchaser's knowledge, any of the persons listed on
Schedules II, III or IV hereto, or any affiliate of the foregoing, (i)
beneficially owns or has a right to acquire any Units, (ii) has effected any
transaction in the Units in the last 60 days, or (iii) has any contract,
arrangement, understanding or relationship with any other person with respect
to any securities of the Partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
Xxxxxx X. Xxxxxx, who is the Chairman of the Board, Chief Executive Officer and
President of Insignia and a trustee of IPT, beneficially owns approximately 28%
of Insignia's outstanding common stock and, as a result, may be deemed to
beneficially own the Units owned by IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $4,750,000 will be required to
purchase 15,000 Units, if tendered, and to pay related fees and expenses. The
Purchaser (which is an affiliate of the General Partner) expects to obtain all
of those funds from IPLP, which in turn intends to use its cash on hand.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation with the General Partner. Upon the Partnership's formation
in 1976, five individuals were the general partners of the Partnership. These
individuals were all shareholders of Consolidated Capital Equities Corporation,
a Colorado corporation ("CCEC"). As a result of a succession of agreements,
CCEC became the Partnership's managing agent. In 1988, through a series of
transactions, Southmark Corporation acquired control
22
of CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of
the United States Bankruptcy Code. In 1990, as part of CCEC's reorganization
plan, the General Partner acquired CCEC's interest as managing agent in the
Partnership and its general partner interests in 15 other affiliated public
limited partnerships (the "Affiliated Partnerships") and the General Partner
replaced CCEC as the managing general partner of the Partnership (and as the
managing general partner of each of the Affiliated Partnerships). The selection
of the General Partner as the general partner of the Partnership (and of each
of the Affiliated Partnerships) was approved by a majority of the Limited
Partners in the Partnership (and by a majority of the limited partners in each
of the Affiliated Partnerships) pursuant to solicitations commenced in August
1990. Insignia acquired the stock of the General Partner through two
transactions in December 1994 and October 1995, and contributed that stock to
IPT in December 1996 in connection with IPT's formation.
Previous Tender Offer. In 1992, LP Acceptance Corporation ("LP
Corporation") acquired 19,112 (or approximately 39%) of the outstanding Units,
at a purchase price of $200 per Unit, pursuant to a tender offer commenced in
November 1992. LP Corporation was affiliated with the General Partner at the
time, but was not an affiliate of the Purchaser, IPT or Insignia. Insignia
acquired, as a result of a transaction that occurred in December 1994, those
Units and contributed such Units to IPLP following the formation of IPT in
December 1996.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and its other affiliates, including among other things: (i)
the Limited Partnership Agreement, as amended to date; (ii) the Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 1996 and the
Partnership's Quarterly Report on Form 10-QSB for the period ended September
30, 1997; (iii) unaudited results of operations of the Partnership's properties
for the period since the beginning of the Partnership's current fiscal year;
(iv) the operating budgets prepared by IRG with respect to the Partnership's
properties for the year ending December 31, 1997; (v) independent appraisals of
each of the Partnership's properties; and (vi) other information obtained by
IRG, Insignia and other affiliates in their capacities as providers of property
management, asset management and partnership administration services to the
Partnership. Based on that information, the Purchaser (which is an affiliate of
the General Partner) considered several factors, as discussed below.
Trading History of Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the General Partner, from October 1,
1995 to September 30, 1997 an aggregate of 761 Units (representing less than
1.6% of the total outstanding Units) were transferred in sale transactions. Set
forth in the table below are the high and low sales prices of Units for the
quarterly periods from October 1, 1995 to September 30, 1997, as reported by
the General Partner and by The Partnership Spectrum, which is an independent,
third-party source. The gross sales prices reported by The Partnership Spectrum
do not necessarily reflect the net sales proceeds received by sellers of Units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices; thus the Purchaser
does not know whether the information compiled by The Partnership Spectrum is
accurate or complete. The transfer paperwork submitted to the General Partner
often does not include the requested price information or contains conflicting
information as to the actual sales price; accordingly, Limited Partners should
not rely upon this information as being completely accurate.
23
CONSOLIDATED CAPITAL GROWTH FUND
REPORTED SALES PRICES OF PARTNERSHIP UNITS
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(A) THE PARTNERSHIP SPECTRUM(B)
-------------------------- ---------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
----------- ------------ ----------- ------------
Fiscal Year Ended December 31, 1997:
Third Quarter..................................... $175 $255 $205 $280
Second Quarter.................................... 125 225 180 255
First Quarter .................................... 40 315 260 325
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... 92 303 (c) (c)
Third Quarter..................................... 118 405 172 280
Second Quarter.................................... 300 400 (c) (c)
First Quarter..................................... 305 400 185 268
Fiscal Year Ended December 31, 1995:
Fourth Quarter.................................... 305 400 208 250
(a) Although the General Partner requests and records information on the
prices at which Units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The General Partner processes transfers of Units only 12
times per year - on the first day of each month. The prices in the table
are based solely on information provided to the General Partner by sellers
and buyers of Units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a Limited Partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified
or non-qualified plan, uniform gifts, abandonment of Units or similar
nonsale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The Purchaser
(which is an affiliate of the General Partner) does not know whether the
information compiled by The Partnership Spectrum is accurate or complete.
(c) No Units were reported by The Partnership Spectrum as having been sold
during the quarter.
The Purchaser (which is an affiliate of the General Partner) believes
that, although secondary market sales information probably is not a reliable
measure of value because of the limited and inefficient nature of the market
for Units, this information may be relevant to a Limited Partner's decision as
to whether to tender its Units pursuant to the Offer. At present, privately
negotiated sales and sales through intermediaries (e.g., through the trading
system operated by American Partnership Board, Inc., which publishes sell
offers by holders of Units) are the only means available to a Limited Partner
to liquidate an investment in Units (other than the Offer) because the Units
are not listed or traded on any exchange or quoted on NASDAQ.
Appraisals. Each of the Partnership's properties was appraised
recently by an independent, third party appraiser, Xxxxxx X. Xxxxx & Associates
("Blake"), in connection with refinancings of those properties. According to
the appraisal reports, the scope of the appraisals included an inspection of
the properties and an analysis of the surrounding markets. Xxxxx relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its reports were
prepared in accordance with the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal Institute and the Uniform
Standards of Professional Appraisal Practice, and in compliance with the
Appraisal Standards set forth in the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (known as "FIRREA"). The estimated market value of
the fee simple estate of the Partnership's properties specified in the most
recent appraisal reports for the Partnership's properties are set forth in the
table below, and copies of the summaries of those appraisals have been filed as
an exhibit to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed
with the Commission.
24
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL
------------- ------ ---------
Breckinridge Square $10,000,000 11/01/95
Xxxxxxxxx Park 11,100,000 11/01/95
The Lakes 23,100,000 11/07/95
Tahoe Springs 11,900,000 04/30/96
IPT Formation Values. In connection with the formation of IPT,
Insignia prepared estimates of the values of the Partnership's properties and
of a Unit as of December 31, 1996 for purposes of determining the number of
units of limited partnership interest in IPLP it would receive in exchange for
the Units contributed to IPLP by Insignia and its affiliates. For this purpose,
Insignia estimated the aggregate value of the Partnership's properties to be
$54,490,000 and the net asset value of a Unit to be $452. This aggregate
property value estimate is approximately $500,000 (or 0.9%) less than the Gross
Real Estate Value Estimate described below, principally due to changes in the
operating performances of the properties between December 1996 and October
1997; and this Unit value estimate is approximately $35 (or 8.4%) greater than
the Estimated Liquidation Value described below, principally due to two
factors: (i) changes in the Partnership's net current assets between December
1996 and September 1997, and (ii) this was an estimate of the "net asset value"
of a Unit and not the "liquidation value" of a Unit and, therefore, Insignia
did not deduct a 2% reserve to account for the costs associated with
liquidating the Partnership's properties or a 3% non-subordinated disposition
fee payable to the General Partner on the sale of the Partnership's properties,
as described below.
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties, the Purchaser utilized
the capitalization of income approach. The estimate of the gross real estate
value of the Partnership's properties prepared by the Purchaser does not
purport to be an estimate of the aggregate fair market value of the Units
themselves, nor should it be viewed as such by Limited Partners. Neither the
Purchaser nor any of its affiliates prepared any estimates of the values of the
Partnership's properties based upon any other valuation method.
The following is a description of the methodology employed by the
Purchaser in preparing such estimates (as used below, "net operating income" is
calculated before depreciation, amortization, debt service payments and certain
capital expenditure items):
BRECKINRIDGE SQUARE APARTMENTS. In estimating the value of this
property, the Purchaser reviewed the income ($1,748,756) generated by the
property for the ten months ended October 31, 1997 (comprised of $1,636,928 of
gross rental income and $111,828 of other income), and then deducted from this
amount the total operating expenses of the property for the first ten months of
1997 ($836,579), resulting in the Purchaser's estimate of net operating income
for the first ten months of 1997 ($912,177). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,094,612, and
then reduced that annualized net operating income amount by $250 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($1,021,112) at a 10% capitalization rate, resulting in an estimated
gross property value of $10,211,120.
XXXXXXXXX PARK APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($2,026,556) generated by the property for
the ten months ended October 31, 1997 (comprised of $1,944,406 of gross rental
income and $82,150 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($988,590), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($1,037,966). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,245,559 and
then reduced that annualized net operating income amount by $250 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($1,149,309) at a 10% capitalization rate, resulting in an estimated
gross property value of $11,493,090.
25
THE LAKES APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($3,433,220) generated by the property for the
ten months ended October 31, 1997 (comprised of $3,212,936 of gross rental
income and $220,284 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($1,398,150), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($2,035,070). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $2,442,084 and
then reduced that amount by $400 per apartment unit, representing the
Purchaser's estimate of the adjustment that would be imputed by a third party
purchaser in underwriting the operating expenses, including normal replacement
reserves, of the property for valuation purposes. Finally, the Purchaser
capitalized its estimated adjusted net operating income amount ($2,202,084) at
a 10.25% capitalization rate, resulting in an estimated gross property value of
$21,483,746.
TAHOE SPRINGS APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($2,270,801) generated by the property for
the ten months ended October 31, 1997 (comprised of $2,151,502 of gross rental
income and $119,299 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($1,255,721), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($1,015,080). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,218,096 and
then reduced that amount by $100 per apartment unit, representing the
Purchaser's estimate of the adjustment that would be imputed by a third party
purchaser in underwriting the operating expenses, including normal replacement
reserves, of the property for valuation purposes. Finally, the Purchaser
capitalized its estimated adjusted net operating income amount ($1,181,296) at
a 10% capitalization rate, resulting in an estimated gross property value of
$11,812,960.
Based on the individual estimates of the gross values of the
Partnership's properties described above, the Purchaser estimated that the
current aggregate gross real estate value of the Partnership's properties is
$55,000,916 (the "Gross Real Estate Value Estimate"). The property-specific
capitalization rates used by the Purchaser in the valuation estimates described
above were based upon the Purchaser's, IPT's and Insignia's general knowledge
of the revenues and expenses associated with operating multi-family properties
in the markets in which the Partnership's properties are located, their general
knowledge of property values in those markets and their experience in the real
estate market in general.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that this approach represents
a reasonable method of estimating the aggregate gross value of the
Partnership's properties (without taking into account the costs of disposing of
the properties), subject to the substantial uncertainties inherent in any
estimate of value. The use of other assumptions, however, particularly as to
the applicable capitalization rate, could produce substantially different
results. None of the Purchaser, IPT or Insignia solicited any offers or
inquiries from prospective buyers of the Partnership's properties in connection
with preparing the Purchaser's estimates of the fair market values of those
properties, and the actual amounts for which the Partnership's properties might
be sold could be significantly higher or significantly lower than the
Purchaser's estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the debt encumbering the Partnership's properties or the other liabilities of
the Partnership, (ii) cash and other assets held by the Partnership, (iii) real
estate transaction costs that would be incurred on a sale of the Partnership's
properties, such as brokerage commissions and other selling and closing
expenses, (iv) timing considerations or (v) costs associated with winding up
the Partnership. For this reason, the Purchaser considers the Gross Real Estate
Value Estimate to be less meaningful in evaluating the Purchase Price offered
by the Purchaser than its pro forma estimate of the net liquidation value per
Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, which are a relatively illiquid
investment, and is not offering to purchase the Partnership's underlying assets
or assume any of its liabilities. Consequently, the Purchaser does not believe
that the per-Unit amount which might be distributed to Limited Partners
following a future sale of all the Partnership's properties necessarily
reflects the present fair value of a Unit. Conversely, the realizable value of
the Partnership's assets clearly is a relevant factor
26
in determining the price a prudent purchaser would offer for Units. In
considering this factor, the Purchaser made a pro forma calculation of the
amount each Limited Partner might receive in a theoretical orderly liquidation
of the Partnership (which may not be realistically possible, particularly in
the near term, due to real estate market conditions, the general difficulty of
disposing of real estate in a short period of time, and other general economic
factors), based on the Gross Real Estate Value Estimate described above and the
other considerations described below. The Purchaser based its pro forma
liquidation analysis on the Gross Real Estate Value Estimate (and thus on the
Purchaser's estimates of the values of the Partnership's properties described
above), as opposed to the appraised values of the Partnership's properties or
the values estimated in connection with the formation of IPT (as described
above), because the Purchaser believes that the Gross Real Estate Value
Estimate represents the best estimate, based on currently available
information, of the values of the Partnership's properties.
In estimating the pro forma net liquidation value per Unit, the
Purchaser adjusted its Gross Real Estate Value Estimate of $55,000,916 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses and security deposits). Specifically, the Purchaser added the
amounts of cash, accounts receivable and escrow deposits shown on the
Partnership's unaudited balance sheet at September 30, 1997 ($3,361,000), and
subtracted the mortgage debt encumbering the Partnership's properties
($30,690,000) and all other liabilities shown on that balance sheet
($1,054,000). The Purchaser then deducted from that amount $1,100,018,
representing a reserve equal to 2% of the Gross Real Estate Value Estimate
(which represents the Purchaser's estimate of the probable costs of brokerage
commissions, real estate transfer taxes and other disposition expenses). The
result, $25,517,898, represents the Purchaser's pro forma estimate of the
aggregate net liquidation proceeds (before provision for the costs described in
the following sentence) which could be realized on an orderly liquidation of
the Partnership, based on the assumptions implicit in the calculations
described above. The Purchaser did not, however, deduct any amounts in respect
of the legal and other costs which the Purchaser expects would be incurred in a
liquidation, including costs of negotiating purchase and sale contracts,
possibly conducting a consent solicitation in order to obtain the Limited
Partners' approvals for the sales as may be required by the Limited Partnership
Agreement, and winding up the Partnership, because of the difficulty of
estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser then
deducted $1,650,027 (which represents the 3% non-subordinated disposition fee
payable to the General Partner upon a sale of the Partnership's properties),
resulting in net aggregate liquidation proceeds of $23,867,871. The Purchaser
then deducted 14%, which is the percentage allocable to the General Partner in
respect of its non-subordinated interest in the Partnership, and the remaining
$20,526,369 was then divided by the 49,196 Units reported as outstanding by the
General Partner as of December 1, 1997. The resulting estimated pro forma
liquidation value was $417.24 per Unit (the "Estimated Liquidation Value"),
before provision for the legal and other costs of liquidating the Partnership
described in the last sentence of the preceding paragraph.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Units because
(i) there is no assurance that any such liquidation in fact will occur in the
foreseeable future and (ii) any liquidation in which the estimated fair market
values described above might be realized would take an extended period of time
(at least a year, and quite possibly significantly longer), during which time
the Partnership and its partners would continue to be exposed to the risk of
fluctuations in asset values because of changing market conditions and other
factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Units is substantially less than its estimate of the Estimated Liquidation
Value. Conversely, there is a substantial possibility that the per-Unit value
realized in an orderly liquidation could be greater than the Estimated
Liquidation Value. A reduction in either operating expenses or capital
expenditures from the levels reflected in the property operating statements for
the ten months ending October 31, 1997 would result in a higher liquidation
value under the method described above. Similarly, a higher liquidation value
would result if a buyer applied lower capitalization rates (reflecting a
willingness to accept a lower rate of return on its investment) to the
applicable net operating income generated by the Partnership's properties
27
than the capitalization rates applied by the Purchaser. For example, a 5%
increase or decrease in the value of the Partnership's properties would produce
a corresponding increase or decrease in the Estimated Liquidation Value of
approximately $46 per Unit. Furthermore, the analysis described above is based
on a series of assumptions, some of which may not be correct. Accordingly, this
analysis should be viewed merely as indicative of the Purchaser's approach to
valuing Units and not as any way predictive of the likely result of any future
transactions.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
the Offer, the Purchaser (which is an affiliate of the General Partner) will
not be required to accept for payment or to pay for any Units tendered if all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been obtained
prior to the Expiration Date. Furthermore, notwithstanding any other term of
the Offer and in addition to the Purchaser's right to withdraw the Offer at any
time before the Expiration Date, the Purchaser (which is an affiliate of the
General Partner) will not be required to accept for payment or pay for any
Units not theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Units if, at any time on or after the date of the
Offer and before the Expiration Date, any of the following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the Offer
or the acceptance for payment, purchase of or payment for any Units by the
Purchaser (which is an affiliate of the General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units, including without limitation the right
to vote any Units acquired by the Purchaser pursuant to the Offer or otherwise
on all matters properly presented to the Partnership's Limited Partners, (iii)
requires divestiture by the Purchaser of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as a result of the
transactions contemplated by the Offer, or (v) might materially adversely
affect the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Purchaser or the
Partnership;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of, or
imposition of a limitation on, the markets thereof, or (vi) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i) more
than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act),
28
or (ii) any person or group that prior to such date had filed a Statement with
the Commission pursuant to Section 13(d) or (g) of the Exchange Act has
increased or proposes to increase the number of Units beneficially owned by
such person or group as disclosed in such Statement by two percent or more of
the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or may
be waived by the Purchaser in whole or in part at any time and from time to
time in its sole discretion. Any determination by the Purchaser (which is an
affiliate of the General Partner) concerning the events described above will be
final and binding upon all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser (which is an affiliate of the General Partner)
is not aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Units by the Purchaser (which is an affiliate of the General
Partner) pursuant to the Offer, other than the filing of a Tender Offer
Statement on Schedule 14D-1 with the Commission (which has already been filed)
and any required amendments thereto. Should any such approval or other action
be required, it is the Purchaser's present intention that such additional
approval or action would be sought. Although there is no present intent to
delay the purchase of Units tendered pursuant to the Offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the Partnership's business, or that certain parts of the
Partnership's business might not have to be disposed of or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser (which is an affiliate of the General Partner)
to elect to terminate the Offer without purchasing Units thereunder.
Antitrust. The Purchaser (which is an affiliate of the General
Partner) does not believe that the Xxxx-ScottRodino Antitrust Improvements Act
of 1976, as amended, is applicable to the acquisition of Units contemplated by
the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section 16,
the Purchaser (which is an affiliate of the General Partner) will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Units pursuant to the Offer. The Purchaser (which is an affiliate of
the General Partner) has retained Beacon Hill Partners, Inc. to act as
Information Agent and Xxxxxx Trust Company of New York to act as Depositary in
connection with the Offer. The Purchaser (which is an affiliate of the General
Partner) will pay the Information Agent and the Depositary reasonable and
customary compensation for their respective services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and has agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection therewith, including liabilities under the federal
securities laws. The Purchaser (which is an affiliate of the General Partner)
will also pay all costs and expenses of printing and mailing the Offer and its
legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser (which is an affiliate of the
General Partner) is not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If the Purchaser (which is an
affiliate of the General Partner) becomes aware of any jurisdiction in which
the making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, the Purchaser (which is an affiliate of the General
Partner) cannot comply with any such law, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) Limited Partners residing in
such jurisdiction. In those jurisdictions whose securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser (which is an affiliate of the
General Partner) by one or more registered brokers or dealers licensed under
the laws of that jurisdiction.
29
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the General
Partner) not contained in this Offer to Purchase or in the Assignment of
Partnership Interest and, if given or made, such information or representation
must not be relied upon as having been authorized.
The Purchaser (which is an affiliate of the General Partner), IPLP,
IPT and Insignia have filed with the Commission a Tender Offer Statement on
Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same places and in
the same manner as set forth in Section 9 (except that they will not be
available at the regional offices of the Commission).
MADISON RIVER PROPERTIES, L.L.C.
DECEMBER 19, 1997
30
SCHEDULE I
TRANSACTIONS IN THE UNITS
EFFECTED BY IPLP WITHIN THE PAST 60 DAYS
Number of Price
DATE Units Purchased Per Unit
---- --------------- --------
11/01/97 10 245.00
S-1
SCHEDULE II
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the managers of the Purchaser. Each
person identified below is employed by Xxxxxxxx and is a United States citizen.
The principal business address of the Purchaser and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has been a Manager of the Purchaser since its inception in
000 Xxxx Xxxxxx December 1997. For additional information regarding Xx. Xxxxx, see
Suite 3401 Schedule III.
New York, NY 10152
Xxxx X. Xxxxx Xxxx X. Xxxxx has been a Manager of the Purchaser since its inception in
December 1997. For additional information regarding Mr. Xxxxx, see
Schedules III and IV.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has been a Manager of the Purchaser since its inception in
December 1997. For additional information regarding Xx. Xxxxxx, see
Schedules III and IV.
S-2
SCHEDULE III
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the trustees and executive officers
of IPT. Each person identified below is employed by Xxxxxxxx and is a United
States citizen. The principal business address of IPT and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29602. Trustees are
identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has served as a Trustee of IPT since December
1996, and has served as Chairman of the Board of Trustees
and Chief Executive Officer of IPT since January 1997. For
additional information regarding Xx. Xxxxxx, see Schedule IV.
Xxxxx X. Xxxxx* Xxxxx X. Xxxxx has served as a Trustee and President of IPT
since its inception in May 1996. For additional information
regarding Xx. Xxxxx, see Schedule IV.
Xxxxx X. Xxxxxxxx* Xxxxx X. Xxxxxxxx has served as a Trustee of IPT since December
102 Woodmont Boulevard 1996. Xx. Xxxxxxxx also served as an Executive Managing
Suite 400 Director of IPT from January 1997 to April 1997. For additional
Nashville, TN 37205 information regarding Xx. Xxxxxxxx, see Schedule IV.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as a Senior Vice President of IPT
000 Xxxx Xxxxxx since August 1997, and served as a Vice President of IPT from
Suite 3401 June 1997 until August 1997. Since April 1997, Xx. Xxxxx'x
New York, NY 10152 principal occupation has been to serve as a Senior Vice President
-- Investment Banking of Insignia. Prior to April 1997, Xx.
Xxxxx'x principal occupation was as an attorney with the law firm
of Xxxxxx & Xxxxx, New York, New York.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as the Controller of IPT since August
1997. Since April 1995, Mr. Xxxxx' principal occupation has been
to serve as an accountant with Insignia. Prior to April 1995, Mr.
Xxxxx' principal occupation was as a senior auditor with the
accounting firm of Ernst & Young LLP.
Xxxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxxx, Xx. has served as a Senior Vice President of
IPT since August 1997, and served as Vice President and Director
of Operations of IPT from December 1996 until August 1997.
Xx. Xxxxxxx'x principal employment has been with Insignia for
more than the past five years. From January 1994 to September
1997, Xx. Xxxxxxx served as Managing Director-- Partnership
Administration of Insignia.
S-3
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx X. Xxxxx Xxxx X. Xxxxx has served as Secretary of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Mr. Xxxxx served as a Vice President IPT from May
1996 until August 1997. For additional information regarding Mr.
Xxxxx, see Schedule IV.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has served as Treasurer of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Xx. Xxxxxx served as a Vice President of IPT from
December 1996 until August 1997 and as Chief Financial Officer
of IPT from May 1996 until December 1996. For additional
information regarding Xx. Xxxxxx, see Schedule IV.
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has served as Chief Operating Officer of IPT
since May 1997. Since August 1994, Xx. Xxxxxx'x principal
occupation has been to serve as President of the various corporate
general partners of partnerships controlled by Metropolitan Asset
Enhancement, L.P., which is an affiliate of Insignia.
S-4
SCHEDULE IV
INFORMATION REGARDING THE
DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the directors and executive
officers of Insignia. Unless otherwise indicated, each person identified below
is employed by Insignia and is a United States citizen. The principal business
address of Insignia and, unless otherwise indicated, the business address of
each person identified below, is One Insignia Financial Plaza, Xxxxxxxxxx,
Xxxxx Xxxxxxxx 00000. Directors are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has been a Director and Chairman, President and Chief
Executive Officer of Insignia since its inception in January 1991.
Xx. Xxxxxx has also been President of Metropolitan Asset Group,
Ltd. ("MAG"), a real estate investment banking firm, since 1983.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of Insignia since May
0000 Xxxxx Xxxxxx Xxxxx 1996. For more than the past five years, Xx. Xxxxxxx'x
Santa Fe, NM 87501 principal occupation has been as a General Partner of
First Security Company II, L.P., an investment advisory firm.
Xxxxx X. Xxxxxx* Xxxxx X. Xxxxxx has been a Director of Insignia since August 1993. Mr.
000 Xxxx Xxxxxx Xxxxxx is the retired Chairman of the Board and Chief Executive Officer of
New York, NY 10021 Xxxxxxxxx'x Inc., a real estate company. He also serves as a director of Refac
Technology Development Corporation, Noodle Kiddoodle, and Containerways
International Ltd.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of Insignia since August 1993. For
000 Xxxxxxx Xxxxxx more than the past five years, Xx. Xxxxxxx'x principal occupation has been as
New York, NY 10022 Chairman of the Board of Directors and Co-Chief Executive Officer of
Charterhouse Group International, Inc., a privately-owned investment firm
which, among other things, actively engages in making private equity
investments in a broad range of industrial and service companies located
primarily in the United States. Xx. Xxxxxxx is also a director of American
Disposal Services, Inc., Designer Holdings Ltd. and Microwave Power Devices,
Inc.
Xxxxxx X. Xxxx* Xxxxxx X. Xxxx has been a Director of Insignia since August 1993. Since
000 Xxxx 00xx Xxxxxx February 1996, Xx. Xxxx has been a partner in the law firm of Akin, Gump,
New York, NY 10019 Xxxxxxx, Xxxxx & Xxxx, which represents Insignia and certain of its affiliates
from time to time. From January 1991 to February 1996, Xx. Xxxx was a
partner in the law firm LeBoeuf, Lamb, Xxxxxx & XxxXxx.
Xxxxxxx X. Xxxxxxxx* Xxxxxxx X. Xxxxxxxx has been a Director of Insignia since August 1993. For
000 Xxxx 00xx Xxxxxx more than the past five years, Xx. Xxxxxxxx'x principal occupation has been as
New York, NY 10022 a self-employed consultant in the real estate business, including ownership,
management and lending.
S-5
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx Xxxxxx* Xxxx Xxxxxx has been a Director of Insignia since August 1993. For more
000 X. Xxxx Xxxxxx than the past five years, Xx. Xxxxxx'x principal occupation has been to serve
Greenville, SC 29601 as Chairman of the Board and Chief Executive Officer of RSI Holdings, a company
which distributes outdoor equipment. Xx. Xxxxxx is also a director of Fluor
Corporation, The Liberty Corporation, NationsBank Corporation, Emergent Group, Inc.,
Delta Woodside Industries, Inc., Duke Power Company, and Textile Hall Corporation.
Xxxxx X. Aston Xxxxx X. Aston's principal employment has been with Insignia for more than
the past five years. Xx. Xxxxx currently serves as Chief Financial Officer
of Insignia (since August 1996) and with the Office of the Chairman (since
July 1994).
Xxxxxx X. Xxxxxx Xxxxxx Xxxxxx has been a Senior Vice President -- Human Resources of
Insignia since August 1997. Prior to August 1997, Xx. Xxxxxx'x principal
employment for more than the prior five years was as Director -- Human
Resources of E&Y Xxxxxxx Xxxxxxxxx Real Estate Group, New York, New York.
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx'x principal employment has been with Insignia for more
000 Xxxxxxxx Xxxxxxxxx than the past five years. Xx. Xxxxxxxx currently serves as an Executive
Suite 400 Managing Director of Insignia (since July 1994) and as President of Insignia
Nashville, TN 37205 Financial Services, a division of Insignia (since July 1994).
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx'x principal employment has been with Insignia for more
000 Xxxx Xxxxxx than the past five years. Xx. Xxxxxxxx currently serves as a Managing
Suite 3401 Director -- Investment Banking of Insignia (since July 1994).
New York, NY 10152
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx has been with the Office of the Chairman of Insignia since
000 Xxxx Xxxxxx July 1996. Prior to July 1996, Xx. Xxxxxx'x principal employment for more
New York, NY 10166 than the prior five years was as a founder and Chairman of Xxxxxx X. Xxxxxx
Company, Incorporated ("ESG"), a commercial property management and
brokerage firm located in New York, New York that was acquired by Insignia
in June 1996.
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx'x principal employment has been with Insignia for more than
the past five years. Xx. Xxxxxxx currently serves as a Senior Vice President
of Insignia (since July 1994) and as Chief Information Officer of Insignia
(since January 1991).
Xxxxx Xxxxxxxx Xxxxx Xxxxxxxx'x principal employment has been with Insignia since January
1993. Xx. Xxxxxxxx currently serves as an Executive Managing Director of
Insignia (since June 1994) and Chief Operating Officer of Insignia
Commercial Group (since January 1997). From January 1987 to January 1993,
Xx. Xxxxxxxx'x principal employment was as Chief Executive Officer of First
Resource Realty, Inc., a commercial property management organization located
in Oklahoma that Insignia acquired in January 1993.
S-6
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx Xxxxxxx Xxxx Xxxxxxx has been an Executive Managing Director of Insignia since
909 Third Avenue September 1995 and President of Insignia Residential Group since September
New York, NY 10022 1997. Prior to September 1995, Xx. Xxxxxxx'x principal occupation was to
serve as President and Chief Executive Officer of Xxxxxxx Company, Inc., a
residential property management firm located in New York, New York which
Insignia acquired in September 1995.
Xxxx X. Xxxxx Xxxx X. Xxxxx has been General Counsel of Insignia since June 1994 and
Secretary since July 1994. From May 1993 until June 1994, Mr. Xxxxx'
principal employment was as Assistant General Counsel and Vice President of
Ocwen Financial Corporation, a thrift holding company located in West Palm
Beach, Florida. From October 1991 until April 1993, Mr. Xxxxx' principal
employment was as Senior Attorney of Banc One Corporation, a bank holding
company in Columbus, Ohio.
Xxxxxx Xxxx Xxxxxx Xxxx has been a Senior Vice President -- Finance of Insignia since
January 1997 and Controller of Insignia since June 1994. Prior to June 1994,
Xx. Xxxx was Senior Vice President and Controller of The First Savings Bank
located in Greenville, South Carolina.
Xxxxx Xxxxxx Xxxxxxxxx Xxxxx Xxxxxx Xxxxxxxxx has been Managing Director and Chief Strategic
000 Xxxx Xxxxxx Officer for European Operations of Insignia since June 1997. From November
New York, NY 10152 1993 until June 1997, Xx. Xxxxxxxxx'x principal employment was as Manager
of YPF, a petroleum company located in Buenos Aires, Argentina. From May
1991 until October 1993, Xx. Xxxxxxxxx'x principal employment was as a
partner of MCA, an advisory company in Madrid, Spain.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx'x principal employment has been with Insignia for more
than the past five years. Xx. Xxxxxx currently serves as Chief Operating
Officer of Insignia Residential Group (since January 1997).
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has been an Executive Managing Director of Insignia since
000 Xxxx Xxxxxx July 1996 and President of Insignia Commercial Group since January 1997.
New York, NY 10166 From February 1992 until July 1996, Xx. Xxxxxx'x principal employment was
as President of ESG.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx'x principal employment has been with Insignia for more than the
past five years. Xx. Xxxxxx currently serves as Chief Operating Officer
(since August 1996) and Treasurer (since January 1992) of Insignia.
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx'x principal employment has been with Realty One, Inc., a
6000 Rockside Xxxxx wholly-owned subsidiary of Insignia ("Realty One"), for more than the past
Blvd. five years. Xx. Xxxxx currently serves as a Director and Chief Executive
Cleveland, OH 44131 Officer of Realty One (since October 1997).
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx'x principal employment has been with Realty One for
6000 Rockside Xxxxx more than the past five years. Xx. Xxxxxxx currently serves as Director,
Blvd. President, Chief Operating Officer and Treasurer of Realty One (since October
Cleveland, OH 44131 1997).
S-7
SCHEDULE V
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Fund XX
Century Properties Growth Fund XXII
Century Pension Income Fund XXIII
Century Pension Income Fund XXIV
Johnstown/Consolidated Income Partners
Davidson Growth Plus, L.P.
Multi-Benefit Realty Fund `87-1
U.S. Realty Partners, X.X.
Xxx Strategic Housing Income Partners
S-8
[THIS PAGE INTENTIONALLY LEFT BLANK]
Manually signed facsimile copies of the Assignment of Partnership
Interest will be accepted. The Assignment of Partnership Interest and any other
required documents should be sent or delivered by each Limited Partner or such
Limited Partner's broker, dealer, bank, trust company or other nominee to the
Depositary as set forth below.
The Depositary for the Offer is:
XXXXXX TRUST COMPANY OF NEW YORK
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (000) 000-0000 (212) 701-0000 Xxxx Xxxxxx Plaza
P.O. Box 0000 00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 Xxx Xxxx, Xxx Xxxx 00000
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at its telephone number and address listed below. You may
also contact your broker, dealer, bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
(Toll Free)
(000) 000-0000
(Call Collect)
