Offer to Purchase for Cash
Up to 6,000 Units of Limited Partnership Interest
in
SHELTER PROPERTIES VII LIMITED PARTNERSHIP,
a South Carolina limited partnership
for
$450 Net Per Unit
by
XXXXXX RIVER PROPERTIES, L.L.C.
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THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME, ON AUGUST 17,
1998, UNLESS THE OFFER IS EXTENDED.
-------------------------------------------------------------------------------
IMPORTANT
Xxxxxx River Properties, L.L.C., a Delaware limited liability company
(the "Purchaser"), is offering to purchase up to 6,000 of the outstanding units
of limited partnership interest ("Units") in Shelter Properties VII Limited
Partnership, a South Carolina limited partnership (the "Partnership"), at a
purchase price of $450 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 Shelter Realty VII Corporation, which is the corporate 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 2,427 Units (including 2,180
Units, which were originally acquired by an affiliate of
Insignia and the General Partner, at a purchase price of $350
per Unit pursuant to a tender offer commenced in December
1997).
o The net asset value per Unit most recently estimated by the
General Partner was $636 as of December 31, 1997, and the net
liquidation value per Unit (the "Estimated Liquidation
Value") estimated by the Purchaser (which is an affiliate of
the General Partner) in connection with the Offer is $641.07.
The Purchaser does not believe, however, that either the
General Partner's net asset value estimate or the Estimated
Liquidation Value represents a fair estimate of the market
value of a Unit, primarily due to the fact that such
estimates do 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 such estimates 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 a significant number of Units, it will be able to
significantly influence 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 or an individual general
partner and mergers, consolidations and other extraordinary
transactions.
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, in order for a partial tender to be valid, after the sale of Units
pursuant to the Offer, the Limited Partner must continue to hold a minimum of
three Units (or, in the case of Limited Partners who hold Units in an
Individual Retirement Account, at least two Units). Tenders of fractional Units
will not be permitted, except by a Limited Partner who is tendering all of the
Units owned by that Limited Partner.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at the address and telephone numbers set forth below and
on the back cover of this Offer to Purchase. No soliciting dealer fees or other
payments to brokers for tenders are being paid by the Purchaser (which is an
affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(000) 000-0000
July 21, 1998
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
Pending Legislation..................................................................................... 10
Unrealized Receivables and Certain Inventory............................................................ 11
Passive Activity Loss Limitation........................................................................ 11
Partnership Termination................................................................................. 11
Backup Withholding and FIRPTA Withholding............................................................... 12
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.............................................................................. 16
Operating Budgets of the Partnership.................................................................... 16
Section 10. Conflicts of Interest and Transactions with Affiliates......................................... 17
Conflicts of Interest with Respect to the Offer......................................................... 17
i
Voting by the Purchaser................................................................................. 17
Financing Arrangements.................................................................................. 18
Transactions with Affiliates............................................................................ 18
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia........................... 18
The Purchaser........................................................................................... 18
IPT and IPLP............................................................................................ 18
Insignia................................................................................................ 20
Section 12. Source of Funds................................................................................ 22
Section 13. Background of the Offer........................................................................ 23
Affiliation With the General Partner.................................................................... 23
Determination of Purchase Price......................................................................... 23
Section 14. Conditions of the Offer........................................................................ 27
Section 15. Certain Legal Matters.......................................................................... 28
General................................................................................................. 28
Antitrust............................................................................................... 28
Margin Requirements..................................................................................... 28
Section 16. Fees and Expenses.............................................................................. 28
Section 17. Miscellaneous.................................................................................. 28
SCHEDULE I -- Information Regarding the Managers of the Purchaser.............................................S-1
SCHEDULE II -- Information Regarding the Trustees and Executive Officers of IPT................................S-2
SCHEDULE III -- Information Regarding the Directors and Executive Officers of Insignia..........................S-4
SCHEDULE IV -- IPT Partnerships................................................................................S-7
ii
TO THE LIMITED PARTNERS OF
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
INTRODUCTION
Xxxxxx River Properties, L.L.C. (the "Purchaser"), which is a Delaware
limited liability company and an affiliate of the General Partner, hereby
offers to purchase up to 6,000 Units, representing approximately 35% of the
Units outstanding, in Shelter Properties VII Limited Partnership, a South
Carolina limited partnership (the "Partnership"), at a purchase price of $450
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"), in order for a partial tender to be valid, after the sale of Units
pursuant to the Offer, the Limited Partner must continue to hold a minimum of
three Units (or, in the case of Limited Partners who hold Units in an
Individual Retirement Account ("IRA"), at least two Units). Tenders of
fractional Units will not be permitted, except by a Limited Partner who is
tendering all of the Units owned by that Limited Partner. 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. Shelter Realty
VII Corporation, which is the corporate 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 individual general partner
of the Partnership, X. Xxxxxx Xxxx, Jr., is prohibited by the Limited
Partnership Agreement from participating in the activities of the Partnership.
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 68% of the
outstanding common shares of IPT. For more than the past three years, Insignia
Residential Group, L.P. ("IRG"), which is an affiliate of Insignia and the
Purchaser, 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 asset value per Unit most recently estimated by the
General Partner was $636 as of December 31, 1997, and the net
liquidation value per Unit (the "Estimated Liquidation
Value") estimated by the Purchaser (which is an affiliate of
the General Partner) in connection with the Offer is $641.07.
See Section 13 for a discussion of why the Purchaser (which
is an affiliate of the General Partner) believes that such
estimates are 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 a significant
number of Units pursuant to the Offer, the Purchaser (which
is an affiliate of the General Partner) will have the right
to vote those Units and thereby significantly influence 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 or an individual general partner and mergers,
consolidations and other extraordinary transactions. 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. At present, Limited Partners
may seek to negotiate private sales or sales through a
trading system such as the American Partnership Board, which
publishes sell offers by Limited Partners in respect of
Units. 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
16% greater than the highest reported 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, real estate markets also may be
adversely affected by a variety of factors, including
possible fluctuations in interest rates, economic slowdowns
and overbuilding. Accordingly, ownership of Units continues
to be a speculative investment. THE OFFER MAY PROVIDE LIMITED
PARTNERS WITH THE OPPORTUNITY TO LIQUIDATE THEIR INTERESTS IN
THE PARTNERSHIP AND REPLACE THEM WITH INVESTMENTS THAT ARE
LESS SPECULATIVE.
2
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. Although
the number of Units sought in the Offer will not give the Purchaser (which is
an affiliate of the General Partner) absolute control over the Partnership, if
the Purchaser is successful in acquiring all or a substantial portion of the
Units it is tendering for, it will be in a position to exercise significant
influence over the outcome of any vote by Limited Partners. 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 (under)
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
issuance by the Partnership, the sale is expected to result in a gain, which
may be taxable as ordinary income, capital gain 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 March 18, 1985 the General
Partner anticipated that the Partnership would sell and/or refinance its
properties three to eight years after their acquisition, depending upon the
then current real estate and money markets, economic climate and income tax
consequences to the Limited Partners. In general, the General Partner regularly
evaluates the Partnership's properties by considering various factors, such as
the Partnership's financial position and real estate and capital markets
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
3
factors, and possibly others, could potentially contribute to any decision by
the General Partner to sell, refinance, upgrade with capital improvements or
hold a particular Partnership property. Based on the above considerations, the
General Partner has determined that it is not in the best interest of Limited
Partners to sell or refinance either of the Partnership's properties at the
present time. Under the Limited Partnership Agreement the term of the
Partnership will continue until December 31, 2024, unless sooner terminated as
provided in the Limited Partnership Agreement or by law. Limited Partners
could, as an alternative to tendering their Units, take a variety of possible
actions, including voting to liquidate the Partnership or causing the
Partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however.
See Section 14.
Distributions. The Partnership made a cash distribution to Limited
Partners of $17.30 per Unit in 1997. Prior to the 1997 distribution, the only
other distribution made by the Partnership was in 1985 ($11.19 per Unit). In
total, original investors in the Partnership have received distributions of
only $28.49 in respect of their original $1,000 investment made in 1985. See
Section 9. However, the Partnership is currently generating positive cash flow
from operations, and the Purchaser (which is an affiliate of the General
Partner) believes that the Partnership will continue to generate positive cash
flow from operations. 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 July 21, 1998, 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 July 1, 1998 there were 17,343 Units issued and outstanding,
which were held of record by 1,462 Limited Partners. IPLP currently owns 2,427
(representing approximately 14%) of the outstanding Units.
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 6,000 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 August 17, 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 JULY 21, 1998 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 6,000 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 6,000 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 9.1 of the Limited Partnership
Agreement (which generally requires that, in order for a partial tender to be
valid, a Limited Partner continues to hold a minimum of three Units or, in the
case of Limited Partners who hold Units in an IRA, at least two Units). If the
number of Units validly tendered and not properly withdrawn on or prior to the
Expiration Date is less than or equal to 6,000 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 IRAs and qualified
plans) beneficial owners of Units as of July 1, 1998.
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 held of record in 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, in order for a partial tender to be
valid, after the sale of Units pursuant to the Offer, the Limited Partner must
continue to hold a minimum of three Units (or, in the case of Limited Partners
who hold Units in an IRA, at least two Units). Tenders of fractional Units will
not be permitted, except by a Limited Partner who is tendering all of the Units
owned by that Limited Partner. 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 commercial bank, savings
bank, credit union, savings and loan association or trust company having an
office, branch or agency
6
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 such
Limited Partner and accepted for payment by the Purchaser, regardless of the
fact that the record date for any
7
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 September 18, 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
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.
8
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 if any condition referred to in Section 14 has not been satisfied or
upon the occurrence of any event specified in Section 14 and (iii) 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, 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
9
OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER
OF SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Limited Partner's "amount realized" on the sale and (ii) the
Limited Partner's adjusted tax basis in the Units sold. Generally, a Limited
Partner's adjusted tax basis with respect to a Unit equals its cost, increased
by the amount of income and the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit, and decreased by (i)
any distributions made with respect to such Unit, (ii) the amount of deductions
or losses allocated to the Unit and (iii) any decrease in the amount of
Partnership liabilities (as determined under Code Section 752) allocated to the
Unit. Thus, the amount of a Limited Partner's adjusted tax basis in tendered
Units will vary depending upon the Limited Partner's particular circumstances.
The "amount realized" with respect to a Unit will be a sum equal to the amount
of cash received by the Limited Partner for the Unit pursuant to the Offer,
plus the amount of the Partnership's liabilities allocable to the Unit (as
determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held by
the Limited Partner as a capital asset. Under the Taxpayer Relief Act of 1997
("TRA 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. See the discussion below in
Pending Legislation regarding a possible elimination of the 18-month holding
period currently required for being taxed at the reduced 20% capital gains
rate. However, any gain from the sale of such assets attributable to the
recapture of depreciation with respect to real property (other than certain
depreciation recapture taxable as ordinary income) 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. See the discussion below in Pending Legislation regarding a
possible elimination of the 18-month holding period currently required for
being taxed at the reduced 20% capital gains rate. 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.
Pending Legislation. Congress recently passed the IRS Restructuring
and Reform Act of 1998 ("IRRA 1998"), which eliminates the 18-month holding
period that is currently required to be met in order to take advantage of the
lowest capital gains rates. Under IRRA 1998, this holding period change
generally would be effective for tax years ending after December 31, 1997.
Accordingly, for tax years ending after 1997, capital gains recognized by
individuals or other non-corporate taxpayers on dispositions of capital assets
held for more than 12 months (rather than 18 months) would be eligible for the
reduced 20% capital gains rate introduced in TRA 1997. Although the Clinton
Administration has announced that the President will sign IRRA 1998 once he
receives it from Congress, IRRA 1998 has not been signed into law as of the
date of this Offer, and no assurance can be given that the legislation will in
fact be so signed.
10
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain or loss 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 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 date of the transfer and the names, addresses and tax identification
numbers of the transferor(s) and transferee within 30 days of the date of the
transfer (or, if earlier, by January 15 of the following calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. A substantial portion of any post-1986 losses of
Limited Partners from the Partnership would have been passive losses. Thus,
Limited Partners may have "suspended" passive losses from the Partnership
(i.e., post-1986 net taxable losses in excess of statutorily permitted
"phase-in" amounts which have not been used to offset income from other passive
activities or from the Partnership). Substantially all gain or loss from a sale
of Units pursuant to the Offer will be passive income or loss.
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses, if any (including a portion of any loss
recognized on the sale of Units), can be currently deducted (subject to other
applicable limitations) to the extent of the Limited Partner's passive income
from the Partnership for that year (including any gain recognized on the sale
of Units) plus any other passive income for that year. If, on the other hand, a
Limited Partner sells 100% of its Units pursuant to the Offer, any "suspended"
losses and any losses recognized upon the sale of the Units will be offset
first against any other net passive gain to the Limited Partner from the sale
of the Units and any other net passive activity income from other passive
activity investments, and the balance of any "suspended" net losses from the
Units will no longer be subject to the passive activity loss limitation and,
therefore, will be deductible by such Limited Partner from its other income
(subject to any other applicable limitations), including ordinary income. If a
tendering Limited Partner has suspended passive losses from the Partnership,
such Limited Partner must sell all of its Units to receive these tax benefits.
If more than 6,000 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 transfer 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.
11
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.
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 35% of the outstanding Units), 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 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
12
to the Partnership as a substituted Limited Partner, however, the Purchaser
nonetheless will have the right to vote each Unit purchased in the Offer
pursuant to the irrevocable appointment by tendering Limited Partners of the
Purchaser and its managers and designees as proxies with respect to the Units
tendered by such Limited Partners and accepted for payment by the Purchaser.
See Section 3. As a result, the Purchaser (which is an affiliate of the General
Partner) could be in a position to significantly influence all voting decisions
with respect to the Partnership. In general, IPLP and the Purchaser (which are
affiliates of the General Partner) will vote the Units owned by them in
whatever manner they deem to be in the best interests of IPT, which, because of
their relationship with the General Partner, also may be 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 the
General Partner or an individual 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 an extraordinary
transaction, such as a merger, reorganization or liquidation of the Partnership
or a sale or refinancing of any of the Partnership's properties. However, IPT
and the Purchaser expect that consistent with the General Partner's fiduciary
obligations, the General Partner will seek and review opportunities (including
opportunities identified by IPT and the Purchaser) to engage in transactions
which could benefit the Partnership, such as sales or refinancings of assets or
a combination of the Partnership with one or more other entities, with the
objective of seeking to maximize returns to Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as part
of a complete liquidation; and (iv) mergers or other consolidation transactions
involving the Partnership. Any such merger or consolidation transaction could
involve other limited partnerships in which the General Partner or its
affiliates serve as general partners, or a combination of the Partnership with
one or more existing, publicly traded entities (including, possibly, affiliates
of IPT (which is an affiliate of the General Partner) or IPT itself), in any of
which Limited Partners might receive cash, common stock or other securities or
consideration. There is no assurance, however, as to when or whether any of the
transactions referred to above might occur. If any such transaction is effected
by the Partnership and financial benefits accrue to the Limited Partners of the
Partnership, the Purchaser (and thus IPT) will participate in those benefits to
the extent of its ownership of Units. A merger or other consolidation
transaction and certain kinds of other extraordinary transactions would require
a vote of the Limited Partners, and if the Purchaser is successful in
13
acquiring a significant number of Units pursuant to the Offer (or otherwise),
IPT will be able to significantly influence the outcome of any such vote. 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.
General. The Partnership was organized on October 29, 1984 under the
laws of the State of South Carolina. 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 for the purpose of acquiring
existing apartment properties which offered the potential for appreciation in
value and cash distributions to the Limited Partners from operations.
The Partnership's investment portfolio currently consists of two
residential apartment complexes: a 378- unit complex in Memphis, Tennessee; and
a 188-unit complex in Fort Xxxxxxx, Colorado.
Originally Anticipated Term of Partnership; Alternatives. According to
the Partnership's Prospectus dated March 18, 1985, the General Partner
anticipated that the Partnership would sell and/or refinance its properties
three to eight years after their acquisition, depending upon the then current
real estate and money markets, economic climate and income tax consequences to
the Limited Partners. Under the Limited Partnership Agreement, the term of the
Partnership will continue until December 31, 2024, 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 markets
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 by the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. There are no plans to sell or refinance either of the
Partnership's properties 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, 1997, 1996, 1995, 1994 and 1993 and the Partnership's Quarterly Reports on
Form 10-QSB for the periods ended March 31, 1998 and 1997. More comprehensive
financial and other information is included in such reports and other documents
filed by the Partnership with the Commission, and the following summary is
qualified in its entirety by reference to such reports and other documents and
all the financial information and related notes contained therein.
14
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
SELECTED FINANCIAL DATA
(in thousands, except Unit data)
THREE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, DECEMBER 31,
----------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -------
(UNAUDITED)
Statements of Operations Data:
Rental Income................. $ 927 $ 865 $3,544 $3,517 $3,308 $3,170 $2,962
Other Income.................. $ 50 $ 92 $ 262 $ 170 $ 153 $ 109 $ 69
Total Revenues............. $ 977 $ 957 $3,806 $3,687 $3,461 $3,279 $3,031
Income (Loss) from Operations
(before extraordinary item) $ 134 $ 136 $ 123 $ 220 $ (78) $ 315 $ (312)
Net Income (Loss)............. $ 134 $ 136 $ 123 $ 220 $ (78) $ 315 $ (372)
Net Income (Loss) per Unit.... $ 7.67 $ 7.76 $ 7.03 $12.56 $(4.46) $ 0.02 $(21.24)
AS OF AS OF
MARCH 31, DECEMBER 31,
----------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ---------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $12,669 $12,998 $12,742 $13,084 $12,959 $13,248 $13,393
Total Liabilities............. $11,372 $11,518 $11,579 $11,740 $11,834 $12,046 $12,191
Limited Partners' Equity
(Deficit)................... $ 1,430 $1,614 $ 1,297 $1,479 $1,262 $1,339 $ 1,339
Units Outstanding............. 17,343 17,343 17,343 17,343 17,343 17,343 17,343
Book Value per Unit........... $ 82.45 $93.06 $ 74.79 $85.28 $72.77 $77.21 $ 77.21
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
-------------------------- -------- ---------------------------- ----------------------
Hickory Ridge Apartments 08/27/85 Fee ownership Residential Apartments
Memphis, Tennessee (subject to first mortgage) (378 units)
Governor's Park Apartments 09/30/85 Fee ownership Residential Apartments
Fort Xxxxxxx, Colorado (subject to first and second (188 units)
mortgages)
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, 1997 ($ amounts in
thousands).
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
-------------------------------------- --------------- --------------- ------------- -------------- ------------
Hickory Ridge Apartments $13,906 $6,833 5-29 yrs. S/L $6,647
Governor's Park Apartments 7,541 3,073 5-39 yrs. S/L 3,327
-------- ------ ------
TOTALS $21,447 $9,906 $9,974
======= ====== ======
15
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1997 ($ amounts in thousands).
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1997 RATE AMORTIZED DATE MATURITY
----------------------------------------- ------------- ----------- --------------- ---------------- -----------
Hickory Ridge Apartments $6,502 7.50% (a) 03/01/01 $6,057
Governor's Park Apartments
1st Mortgage 4,530 7.83% (b) 10/15/03 4,083
2nd Mortgage 47 7.83% none 10/15/98 147
---------
11,179 $10,287
=========
Less unamortized discounts (63)
TOTALS $11,116
========
(a) The principal balance is being amortized over 300 months with a balloon
payment due March 1, 2001.
(b) The principal balance is being amortized over 344 months with a balloon
payment due October 15, 2003.
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
-------------------------- ---------------------------- -------------------------
1997 1996 1997 1996
------ ------ ---- ----
Hickory Ridge Apartments $6,374 $5,971 90% 96%
Governor's Park Apartments $8,034 $7,637 95% 95%
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1997 for each of the Partnership's
properties.
1997 1997
PROPERTY BILLING RATE
-------------------------- -------- -----
Hickory Ridge Apartments $109,000 3.16%
Governor's Park Apartments $ 72,000 9.77%
Other Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial results and other matters. Such reports and other documents may be
inspected at the Commission's Public Reference Section, Room 1024, 000 Xxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, where copies may be obtained at
prescribed rates, and at the regional offices of the Commission located in the
Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
and 7 World Trade Center, New York, New York 10048. Copies should be available
by mail upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000. The Commission also maintains a web site that contains reports, proxy
and other information filed electronically with the Commission, the address of
which is xxxx://xxx.xxx.xxx.
Cash Distributions History. The Partnership made a cash distribution
to Limited Partners of $17.30 per Unit in 1997. Prior to the 1997 distribution,
the only other distribution made by the Partnership was in 1985 ($11.19 per
Unit). In total, original investors in the Partnership have received
distributions of only $28.49 in respect of their original $1,000 investment
made in 1985.
Operating Budgets of the Partnership. A summary of the fiscal 1997 and
1998 operating budgets and the audited results of operations for fiscal 1997 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
16
expenses when the financial statements are audited and presented in accordance
with GAAP. Therefore, the summary operating budget presented for fiscal 1998
should not necessarily be considered as indicative of what the audited
operating results for fiscal 1998 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 1997 FISCAL 1997 FISCAL 1998
BUDGETED AUDITED BUDGETED
------------- -------------- -------------
Total Revenues from Property Operations........................... $ 3,851,000 $ 3,806,000 $ 4,001,000
Total Operating Expenses ......................................... $ 1,601,000 $ 1,972,000 $ 1,659,000
Net Operating Income.............................................. $ 2,250,000 $ 1,834,000 $ 2,342,000
Capital Expenditures.............................................. $ 692,000 $ 996,000 $ 449,000
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives to
seek to maximize the value of its ownership of Units, which in turn may result
in a conflict for the General Partner in attempting to reconcile the interests
of the Purchaser (which is an affiliate of the General Partner) with the
interests of the other Limited Partners. In addition, the Purchaser (which is
an affiliate of the General Partner) is making the Offer with a view to making
a profit. Accordingly, there is a conflict between the desire of the Purchaser
(which is an affiliate of the General Partner) to purchase Units at a low price
and the desire of the Limited Partners to sell their Units at a high price. The
General Partner has indicated in the Schedule 14D-9 that it is remaining
neutral and making no recommendation as to whether Limited Partners should
tender their Units pursuant to the Offer. LIMITED PARTNERS ARE URGED TO READ
THIS OFFER TO PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Voting by the Purchaser. The 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, when admitted, will have
the right to vote each Unit purchased pursuant to the Offer. Even if the
Purchaser (which is an affiliate of the General Partner) is not admitted to the
Partnership as a substituted Limited Partner, however, the Purchaser
nonetheless will have the right to vote each Unit purchased in the Offer
pursuant to the irrevocable appointment by tendering Limited Partners of the
Purchaser (which is an affiliate of the General Partner) and its managers and
designees as proxies with respect to the Units tendered by such Limited
Partners and accepted for payment by the Purchaser. See Section 3. As a result,
if the Purchaser (which is an affiliate of the General Partner) is successful
in acquiring a significant number of Units pursuant to the Offer, the Purchaser
will have the right to vote those Units and thereby significantly influence 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 interests,
which, because of their relationship with the General Partner, also may be in
the interest of the General Partner, but may not be in the interest of other
Limited Partners. This could (i) prevent non-tendering Limited Partners from
taking action they desire but that IPT opposes and (ii) enable IPT to take
action desired by IPT but opposed by non-tendering Limited Partners. Under the
Limited Partnership Agreement, Limited Partners holding a majority of the Units
are entitled to take action with respect to a variety of matters, including:
removal of the General Partner or an individual 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.
17
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 and, if necessary, funds available to it under
its credit facility (as described in Section 12) to make such contributions.
See Section 12. It is possible, however, that in connection with its future
financing activities, IPT or IPLP may cause or request the Purchaser (which is
an affiliate of the General Partner) to pledge the Units as collateral for
loans, or otherwise agree to terms which provide IPT, IPLP and the Purchaser
with incentives to generate substantial near-term cash flow from the
Purchaser's investment in the Units. This could be the case, for example, if a
loan has a "balloon" maturity after a relatively short time or bears a high or
increasing interest rate. In such a situation, the General Partner may
experience a conflict of interest in seeking to reconcile the best interests of
the Partnership with the need of its affiliates for cash flow from the
Partnership's activities.
Transactions with Affiliates. The Partnership paid IRG property
management fees for property management services in the amounts of
approximately $184,000, $182,000 and $171,000 for the years ended December 31,
1997, 1996 and 1995, respectively, and has paid IRG property management fees
equal to $47,000 during the first three months of 1998. 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 for the years
ended December 31, 1997, 1996 and 1995 in the amounts of $136,000, $97,000 and
$68,000, respectively, and has reimbursed them for such services in the amount
of $23,000 through March 31, 1998. The reimbursement amounts for the years
ended December 31, 1997 and 1996 include $51,000 and 18,000, which was paid to
an affiliate of the General Partner for costs incurred in connection with
construction oversight services. For the period January 1, 1996 through August
31, 1997, the Partnership insured its properties under a master policy through
an agency affiliated with the General Partner, but with an 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 then current year's
master policy. That agent assumed the financial obligations to the affiliate of
the General Partner who received 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 such arrangement was 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 I 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 multi-family 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.
IPT has engaged Insignia to provide certain investment banking and
related services to IPT and IPLP, including in connection with the Offer.
18
Substantially all of IPT's assets consist of (i) interests in entities
which comprise or control the managing general partners of real estate limited
partnerships, including the Partnership (the "IPT Partnerships"), which
interests are held by IPT directly, and (ii) limited partner interests in the
IPT Partnerships, which interests are held through IPLP. The IPT Partnerships
own, in the aggregate, 349 properties containing approximately 73,000
residential apartment units and approximately 5.9 million square feet of
commercial space. See Schedule IV for a list of the IPT Partnerships in which
IPT has a material investment.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which at the time
was an affiliate of IPT but has subsequently been merged into IPT, see Section
13) ("MAE GP"), and Angeles Mortgage Investment Trust, an unincorporated
California business trust ("AMIT"), entered into a definitive merger agreement
(the "AMIT Merger Agreement"), pursuant to which AMIT is to be merged with and
into IPT, with IPT being the surviving entity, in a stock for stock transaction
(the "AMIT Merger"). XXXX is a public company whose Class A shares trade on the
American Stock Exchange under the symbol ANM. Insignia and its affiliates
currently own 96,800 (or approximately 3.7%) of the 2,617,000 outstanding AMIT
Class A shares and all of the 1,675,113 outstanding AMIT Class B shares. If the
AMIT Merger is consummated, IPT will become a publicly traded company (IPT has
applied to list its shares on the American Stock Exchange, which listing is
subject to completion of the AMIT Merger), and it is anticipated that Insignia
and its affiliates will own approximately 57% of post-merger IPT, the former
AMIT shareholders (other than Insignia and its affiliates) will own
approximately 16% of post-merger IPT, and the current unaffiliated shareholders
of IPT will own the remaining 27% of post-merger IPT (see, however, the
discussion of the merger of Insignia and AIMCO in the following subsection of
this Section 9 captioned "Insignia").
The XXXX Xxxxxx is expected to be completed in the second quarter of
1998. However, consummation of the AMIT Merger is subject to several
conditions, including approval of the AMIT Merger Agreement and the AMIT Merger
by the shareholders of AMIT. Accordingly, there can be no assurance as to when
the AMIT Merger will occur, or that it will occur at all.
The principal executive offices of IPT and IPLP are located at One
Insignia Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and
the telephone number of each is (000) 000-0000. For certain information
concerning the trustees and executive officers of IPT, see Schedule II 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.
19
INSIGNIA PROPERTIES TRUST SELECTED
CONSOLIDATED FINANCIAL INFORMATION (in
thousands, except share and unit data)
THREE MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ----------------- -----------------
(unaudited) (audited) (audited)
Statements of Operations Data:
Revenues............................................ $ 5,757 $ 16,826 $ 9,705
Income Before Extraordinary Item.................... $ 2,054 $ 6,074 $ 3,557
Net Income.......................................... $ 2,080 $ 6,004 $ 2,425
Supplemental Data:
Funds From Operations(1)............................ $ 7,439 $ 20,939 $ 12,563
IPT Common Shares Outstanding....................... 19,427,760 18,573,151 11,168,036
IPLP Units Outstanding.............................. 9,934,476 9,415,947 8,399,499
----------- ----------- -----------
IPT Common Shares and IPLP Units Outstanding(2)..... 29,362,236 27,989,098 19,567,535
=========== =========== ===========
Balance Sheets Data:
Cash................................................ $ 23,338 $ 37,432 $ 4,928
Investments in IPT Partnerships(3).................. $ 177,681 $ 159,469 $ 118,741
Long-Term Debt...................................... $ 21,957 $ 19,300 $ 19,730
Shareholders' Equity(4)............................. $ 206,298 $ 200,659 $ 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) As of March 31, 1998, represented IPT's investment in 41 of the 124 IPT
Partnerships which IPT accounts for using the equity method. Of the
remaining 83 IPT Partnerships, IPT accounts for 81 using the cost method
and two using the consolidation method.
(4) Includes Insignia's minority interest in IPLP.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of commercial
properties. Insignia's real estate services include property management,
providing all of the day-to-day services necessary to operate a property,
whether residential or commercial; asset management, including long-term
financial planning, monitoring and implementing capital improvement plans, and
development and execution of refinancings and dispositions; real estate leasing
and brokerage; maintenance and construction services; marketing and
advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 3,800 properties, which include approximately 272,000 residential
units (including cooperative and condominium units), and in excess of 208
million square feet of retail, commercial and industrial space, located in over
500 cities in 48 states, Italy, the United Kingdom and Germany. Insignia
currently provides partnership administration services to approximately 900
limited partnerships having approximately 350,000 limited partners. Insignia is
a public company whose stock is traded on the New York Stock Exchange under the
symbol IFS.
On March 17, 1998, Insignia and Apartment Investment and Management
Company, a Maryland corporation ("AIMCO"), entered into a definitive merger
agreement (as subsequently amended and restated, the "AIMCO Merger Agreement"),
pursuant to which substantially all of Insignia's residential real estate
operations and ownership interests, including its interests in IPT and IPLP,
are to be merged with and into AIMCO, with AIMCO as the surviving corporation
(the "AIMCO Merger"). AIMCO is a public REIT whose Class A shares trade on the
New York Stock Exchange under the symbol AIV. The AIMCO Merger is expected to
be completed in the third quarter of 1998. However, consummation of the AIMCO
Merger is subject to certain conditions, including the approval of the
shareholders of Insignia. Accordingly, there can be no assurance as to when the
AIMCO Merger will occur, or that it will occur at all.
Assuming the AIMCO Merger is consummated, AIMCO will succeed to
Insignia's ownership of IPT and IPLP, and thus IPT (and the Partnership) will
thereafter be controlled by AIMCO. In addition, AIMCO is required pursuant to
the AIMCO Merger Agreement to acquire all of the outstanding shares of IPT not
owned by Insignia
20
by causing IPT to merge with and into AIMCO (or a subsidiary of AIMCO) as soon
as practicable after the consummation of the AIMCO Merger, in which event IPT
would cease to exist as a separate entity and AIMCO would effectively own all
of the Units acquired by the Purchaser pursuant to the Offer.
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 III 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, 1997, 1996 and 1995 and the three-month periods ended March
31, 1998 and 1997. More comprehensive financial and other information is
included in Insignia's Annual Report on Form 10-K for the year ended December
31, 1997 (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)
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------------------------- ---------------------------------------
1998 1997 1997 1996 1995
------------- ------------- ------------ ------------- ------------
(unaudited)
Statements of Operations Data:
Total Revenues.................................. $ 130,458 $ 67,912 $ 400,843 $ 227,074 $ 123,032
Income Before Taxes and Extraordinary Item...... $ 3,486 $ 3,340 $ 17,055 $ 14,946 $ 10,093
Net Income...................................... $ 1,917 $ 2,004 $ 10,233 $ 8,564 $ 5,806
Earnings Per Share.............................. $ 0.06 $ 0.06 $ 0.32 $ 0.26 $ 0.20
AS OF AS OF
MARCH 31, DECEMBER 31,
--------------------------- --------------------------------------
1998 1997 1997 1996 1995
------------- ------------- ------------ ------------- -----------
(unaudited)
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 73,143 $ 69,821 $ 89,427 $ 60,131 $ 88,847
Receivables..................................... $ 151,919 $ 52,455 $ 73,657 $ 14,292 $ 122,180
Total Assets................................ $ 922,810 $ 486,809 $ 568,768 $ 471,889 $ 800,223
Accounts Payable................................ $ 17,347 $ 2,417 $ 8,767 $ 2,602 $ 13,705
Commissions Payable............................. $ 56,404 $ 18,264 $ 30,841 $ 9,257 $ 51,285
Accrued and Sundry Liabilities.................. $ 114,524 $ 32,186 $ 50,893 $ 24,604 $ 102,009
Long-Term Debt.................................. $ 258,422 $ 68,905 $ 58,417 $ 205,590 $ 189,704
Total Liabilities........................... $ 446,697 $ 121,772 $ 148,918 $ 255,714 $ 356,703
Redeemable Convertible Preferred Stock.......... -- -- -- -- --
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 144,137 143,943 $ 143,993 -- $ 144,065
Minority Interest in Consolidated Subsidiaries.. $ 65,082 $ -- $ 52,778 $ 2,762 $ 61,546
Shareholders' Equity........................ $ 266,894 $ 221,094 $ 223,079 $ 213,413 $ 237,909
Except as otherwise set forth herein, 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 I, II or III
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 $3,000,000 will be required to
purchase 6,000 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 and
borrowings from its credit facility with a commercial bank and financial
institution. The Purchaser has not conditioned the Offer on obtaining
financing.
The following is a summary description of the existing credit facility
(the "Facility") provided for the benefit of IPLP pursuant to the Credit
Agreement, dated as of December 30, 1997 (the "Credit Agreement"), among IPLP,
as borrower, Xxxxxx Commercial Paper, Inc., as syndication agent, First Union
National Bank, as administrative agent and the lenders from time to time
parties thereto (the "Lenders"). This summary description does not purport to
be complete and is qualified in its entirety by reference to the Credit
Agreement, a copy of which has been filed as an exhibit to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission.
22
Pursuant to the Credit Agreement, the Lenders have made available to
IPLP a revolving credit facility of up to $50.0 million at any one time
outstanding. Loans under the Facility (the "Loans") may be utilized to finance
certain permitted investments and refinance certain investments made prior to
the date of the Credit Agreement.
The Facility matures in a single installment on December 30, 2000.
Loans bear interest, at IPLP's election, (i) at a rate equal to the
higher of (a) the rate announced from time to time by First Union National Bank
as its base lending rate or (b) the daily effective federal funds rate as
quoted by First Union National Bank; or (ii) at rates based on the London
interbank offered rate, as adjusted for certain reserve and other requirements
applicable to lenders, for one-, two-, three- or six-month periods plus an
interest margin of 2.50%. As of the date hereof, IPT has no outstanding
indebtedness under the Facility.
IPT is obligated to pay a commitment fee at a rate of 0.25% per annum
on the undrawn portion of the Facility. Such commitment fee is payable
quarterly in arrears and calculated based on the actual number of days elapsed
over a 365-day year.
The Loans are subject to mandatory prepayment only to the extent that
the aggregate outstanding principal amount of the Loans on any day exceeds the
amount of the Facility then in effect. Voluntary prepayments of the Loans and
voluntary reductions of the Facility are permitted in whole or in part at the
option of IPLP, in minimum principal amounts, without premium or penalty,
subject to reimbursement of certain of the Lenders' costs under certain
conditions.
IPLP's obligations under the Facility have been guaranteed by IPT and
such guaranty is secured by a first priority pledge of and security interest in
the capital stock or other equity interests held by IPT in each of the
subsidiaries of IPT which directly or indirectly, owns or controls the general
partner interest (including an interest in the General Partner) in any Real
Estate Entity (as defined below) in which IPLP, directly or indirectly owns a
limited partner interest (including the Partnership). In addition, the Facility
is secured by a first priority pledge of and security interest in all limited
partnership interests from time to time owned by IPLP and the equity interests
from time to time held by IPLP in any subsidiary of IPLP which itself owns
limited partnership interests. The Credit Agreement defines a "Real Estate
Entity" as any limited partnership, limited liability company, corporation or
other entity which has as its principal business the ownership of real property
or debt secured by real property. Thus, the IPT Partnerships (including the
Partnership) constitute Real Estate Entities for purposes of the Credit
Agreement.
The Facility contains representations and warranties, conditions
precedent, covenants, events of default and other provisions customarily found
in similar transactions.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation With the General Partner. In December 1990, Insignia
purchased substantially all of the assets of U.S. Shelter Corporation, a major
property management and real estate services company and an affiliate of the
General Partner. In connection with this acquisition, Insignia acquired general
partner interests in approximately 150 limited partnerships, including the
Partnership. The individual general partner of the Partnership, X. Xxxxxx Xxxx,
Jr., effectively is prohibited by the Limited Partnership Agreement from
participating in the management or conduct of the Partnership's business and
affairs, because those functions are reserved exclusively to the General
Partner.
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, 1997 and the
Partnership's Quarterly Report on Form 10-QSB for the period ended March 31,
1998; (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, 1998; (v) independent appraisals 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. The Purchaser's
23
determination of the Purchase Price was based on its review and analysis of the
foregoing information, the other financial information and analyses concerning
the Partnership summarized below. In determining the Purchase Price, the
Purchaser did not rely upon any material, non-public information concerning the
Partnership not summarized below or elsewhere in this Offer to Purchase.
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 July 1, 1996
to June 30, 1998 an aggregate of 367 Units (representing less than 2.2% of the
total outstanding Units) was transferred in sale transactions. Set forth in the
table below are the high and low sales prices of Units for the quarterly
periods from July 1, 1996 to June 30, 1998 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.
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
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, 1998:
Second Quarter.................................... $300 $388 n/a n/a
First Quarter..................................... 152 298 $224 $224
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................... 254 254 (c) (c)
Third Quarter ................................... 230 230 254 300
Second Quarter.................................... 137 280 200 271
First Quarter .................................... 170 250 185 280
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... 100 162 170 242
Third Quarter..................................... 78 254 142 254
(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 4 times
per year - on the first day of each fiscal quarter. 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 non- sale 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.
24
General Partner's Annual Estimates of Net Asset Value. The Limited
Partnership Agreement requires that the General Partner prepare an annual
estimate of the Partnership's net asset value per Unit based on the annual
third-party appraisals of the Partnership's properties described below. The
General Partner's three most recent estimates of the Partnership's net asset
value per Unit, based on such appraisals, were $636, $634 and $437 per Unit,
respectively, as of December 31, 1997, 1996 and 1995. The General Partner
estimates net asset value based on a hypothetical sale (without taking into
account any transaction costs) of all of the Partnership's properties at their
appraised values and the distribution to the Limited Partners and the General
Partner of the gross proceeds of such sales, net of related indebtedness,
together with the Partnership's cash, proceeds from temporary investments, and
all other assets that are believed to have liquidation value, after provision
in full for all of the Partnership's other known liabilities. The net asset
value estimates prepared by the General Partner do not take into account (i)
real estate transactional costs that would be incurred on a sale of the
Partnership's properties, such as brokerage commissions and other selling and
closing expenses, (ii) timing considerations or (iii) costs associated with
winding up the Partnership. Therefore, the Purchaser believes that the General
Partner's estimates of net asset value per Unit do not necessarily represent
either the fair market value of a Unit or the amount a Limited Partner
reasonably could expect to receive if the Partnership's properties were sold
and the Partnership was liquidated. For this reason, the Purchaser considered
the General Partner's net asset value estimates to be less meaningful in
determining the Purchase Price than the pro forma liquidation analysis
described below.
Appraisals. Each of the Partnership's properties have been appraised
annually by an independent, third party appraiser (Xxxxxxx Tener Real Estate
Services, Inc. ("KTR"), in the case of the 1997 appraisals) in connection with
the requirement contained in the Limited Partnership Agreement that the General
Partner prepare an annual estimate of the net asset value of a Unit. According
to the appraisal reports, the scope of the appraisals included an inspection of
each property and an analysis of the respective surrounding markets. In each
case, the applicable independent appraiser relied principally on the income
capitalization approach to valuation and secondarily on the sales comparison
approach, and represented that its report was prepared in accordance with the
Code of Professional Ethics and Standards of Professional Appraisal Practice of
the Appraisal Institute and the Uniform Standards of Professional Appraisal
Practice, and in compliance with the Appraisal Standards set forth in the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (known as
"FIRREA"). The estimated market values of the fee simple estate of each of the
Partnership's properties specified in the three most recent appraisal reports
for the Partnership's properties are set forth in the table below, and copies
of the summaries of the 1997 appraisals have been filed as exhibits to the
Purchaser's Tender Offer Statement on Schedule 14D-1 filed with the Commission.
1997 1996 1995
APPRAISED APPRAISAL APPRAISED
PROPERTY NAME VALUE VALUE VALUE
---------------------------------------------- --------------------- ---------------------- -----------------
Hickory Ridge Apartments $12,700,000 $12,850,000 $10,200,000
Governor's Park Apartments $ 9,600,000 $ 9,150,000 $ 8,800,000
----------- ----------- -----------
AGGREGATE APPRAISED VALUE $22,300,000 $22,000,000 $19,000,000
=========== =========== ===========
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties, the Purchaser (which
is an affiliate of the General Partner) relied on the appraised values
described above in determining the estimated values of the Partnership's
properties. The Purchaser (which is an affiliate of the General Partner)
reviewed the capitalization rates and the analysis of operations utilized by
KTR in preparing its estimates of the values of the Partnership's properties
for 1997, and based on that review, the Purchaser determined that those
capitalization rates were within a range of reasonableness. Working backwards
from the appraised value of each property, the Purchaser (which is an affiliate
of the General Partner) calculated the implied gross rent multiplier for each
of the Partnership's properties, and determined that the multiplier for each
property was within a range of reasonableness. The Purchaser (which is an
affiliate of the General Partner) also calculated, based on the appraised value
of each of the Partnership's properties, the implied cost per apartment unit,
and determined that those costs were within a range of reasonableness.
Based on the estimates of the appraised 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 $22,300,000 (the
"Gross Real Estate Value Estimate"). In relying upon the appraised values of
the Partnership's properties, the Purchaser considered the factors described
above as well as other unquantifiable factors such as the Purchaser's knowledge
of expenses relating to operating properties in the relative markets in which
the Partnership's properties are located and its experience in the real estate
markets in general. The Purchaser concluded that the appraised
25
values of the Partnership's properties are reasonable estimates of the gross
fair values of the Partnership's properties.
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 real estate 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. An appraisal is an estimate or opinion of value and cannot
be relied upon as a precise measure of value or worth. All of the assumptions
and limiting conditions as well as the analysis and methodology included in the
appraisal report are an integral part of the value conclusion. The amount which
could be realized on a sale of any of the Partnership's properties may be
substantially more or less than its appraised value. The Purchaser did not
solicit any offers or inquiries from prospective buyers of the Partnership's
properties.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, which are a relatively illiquid
investment, and is not offering to purchase the Partnership's underlying assets
or assume any of its liabilities. Consequently, the Purchaser does not believe
that the per-Unit amount which might be distributed to Limited Partners
following a future sale of all the Partnership's properties necessarily
reflects the present fair value of a Unit. Conversely, the realizable value of
the Partnership's assets clearly is a relevant factor in determining the price
a prudent purchaser would offer for Units. In considering this factor, the
Purchaser made a pro forma calculation of the amount each Limited Partner might
receive in a theoretical orderly liquidation of the Partnership (which may not
be realistically possible, particularly in the near term, due to real estate
market conditions, the general difficulty of disposing of real estate in a
short period of time, and other general economic factors), based on the Gross
Real Estate Value Estimate (as 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 in large part on the appraised
values of the Partnership's properties described above) as opposed to the
values estimated by the General Partner (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 $22,300,000 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 March 31, 1998 ($1,082,000) and
subtracted the mortgage debt encumbering the Partnership's properties
($11,071,000) and all other liabilities shown on that balance sheet ($301,000).
The Purchaser then deducted from that amount $892,000 representing a reserve
equal to 4% of the Gross Real Estate Value Estimate (which represents the
Purchaser's estimate of the probable costs of brokerage commissions, real
estate transfer taxes and other disposition expenses). The result, $11,118,000
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
divided the estimated aggregate net liquidation proceeds of $11,118,000 by the
17,343 Units reported as outstanding by the General Partner as of July 1, 1998.
The resulting estimated pro forma liquidation value was $641.07 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
26
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 year ended December 31, 1997 would result in a
higher liquidation value under the method described above. Similarly, a higher
liquidation value would result if a buyer applied lower capitalization rates
(reflecting a willingness to accept a lower rate of return on its investment)
to the applicable net operating income generated by the Partnership's
properties than the capitalization rates applied by the appraiser. 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 $62 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
27
a war or armed hostilities or other national or international calamity directly
or indirectly involving the United States, (v) a material change in United
States or other currency exchange rates or a suspension of, or imposition of a
limitation on, the markets thereof, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i) more
than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act), or (ii) any person or group that prior to such
date had filed a Statement with the Commission pursuant to Section 13(d) or (g)
of the Exchange Act has increased or proposes to increase the number of Units
beneficially owned by such person or group as disclosed in such Statement by
two percent or more of the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or may
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-Xxxxx- Xxxxxx 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.
28
If, after such good faith effort, the Purchaser (which is an affiliate of the
General Partner) cannot comply with any such law, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) Limited Partners residing
in such jurisdiction. In those jurisdictions whose securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser (which is an affiliate of the
General Partner) by one or more registered brokers or dealers licensed under
the laws of that jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the General
Partner) not contained in this Offer to Purchase or in the Assignment of
Partnership Interest and, if given or made, such information or representation
must not be relied upon as having been authorized.
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).
XXXXXX RIVER PROPERTIES, L.L.C.
JULY 21, 1998
29
SCHEDULE I
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the managers of the Purchaser. Each
person identified below is employed by Xxxxxxxx and is a United States citizen.
The principal business address of the Purchaser and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has been a Manager of the
000 Xxxx Xxxxxx Xxxxxxxxx since its inception in July 1998. For
Suite 3401 additional information regarding Xx. Xxxxx, see
New York, NY 10152 Schedule II.
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx has been a Manager of the
000 Xxxx Xxxxxx Purchaser since July 1998. For additional
New York, NY 10166 information regarding Xx. Xxxxxxx, see Schedule
III.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has been a Manager of the Purchaser
since its inception in July 1998. For additional
information regarding Xx. Xxxxxx, see Schedules
II and III.
S-1
SCHEDULE II
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
000 Xxxx Xxxxxx and as Chairman of the Board of Trustees and
Suite 3401 Chief Executive Officer of IPT since December
New York, NY 10152 1996. For additional information regarding Xx.
Xxxxxx, see Schedule III.
Xxxxx X. Xxxxx* Xxxxx X. Xxxxx has served as a Trustee of IPT
since its inception in May 1996, and has served
as President and Director of IPT since December
1996. For additional information regarding Xx.
Xxxxx, see Schedule III.
Xxxxx X. Xxxxxxxx* Xxxxx X. Xxxxxxxx has served as a Trustee of IPT
000 Xxxxxxxx Xxxxxxxxx since December 1996. Xx. Xxxxxxxx has also served
Suite 400 as an Executive Managing Director of IPT since
Nashville, TN 37205 December 1996. For additional information
regarding Xx. Xxxxxxxx, see Schedule III.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as a Senior Vice
000 Xxxx Xxxxxx President of IPT since August 1997, and has
Suite 3401 served as Secretary of IPT since January 1998.
New York, NY 10152 From June until August 1997, Xx. Xxxxx served as
a Vice President of IPT. Since April 1997, Xx.
Xxxxx'x principal occupation has been to serve as
a Senior Vice President -- Investment Banking of
Insignia. Prior to April 1997, Xx. Xxxxx'x
principal occupation was as an attorney with the
law firm of Xxxxxx & Xxxxx, New York, New York.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as the Controller of
IPT since August 1997. Since April 1995, Mr.
Xxxxx' principal occupation has been to serve as
an accountant with Insignia. Prior to April 1995,
Mr. Xxxxx' principal occupation was as a senior
auditor with the accounting firm of Ernst & Young
LLP.
Xxxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxxx, Xx. has served as a Senior
Vice President of IPT since August 1997, and
served as Vice President and Director of
Operations of IPT from December 1996 until August
1997. Xx. Xxxxxxx'x principal employment has been
with Insignia for more than the past five years.
From January 1994 to September 1997, Xx. Xxxxxxx
served as Managing Director-- Partnership
Administration of Insignia.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has served as Vice President and
Treasurer of IPT since December 1996. 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 III.
S-2
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
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-3
SCHEDULE III
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 of Insignia
000 Xxxx Xxxxxx since its inception in July 1990. Xx. Xxxxxx has
Suite 3401 been Chairman and Chief Executive Officer of
New York, NY 10152 Insignia since January 1991 and President since
May 1995. 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
0000 Xxxxx Xxxxxx Xxxxx since May 1996. For more than the past five
Santa Fe, NM 87501 years, Xx. Xxxxxxx'x principal occupation has
been as a General Partner of First Security
Company II, L.P., an investment advisory firm.
Xxxxx X. Xxxxxx* Xxxxx X. Xxxxxx has been a Director of Insignia
000 Xxxx Xxxxxx since August 1993. Xx. Xxxxxx is the retired
New York, NY 10021 Chairman of the Board and Chief Executive Officer
of 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. Xxxx* Xxxxxx X. Xxxx has been a Director of Insignia
000 Xxxx 00xx Xxxxxx since August 1993. Since February 1996, Xx. Xxxx
New York, NY 10019 has been a partner in the law firm of Akin, Gump,
Strauss, Xxxxx & Xxxx, which represents Insignia
and certain of its affiliates from time to time.
From January 1991 to February 1996, Xx. Xxxx was
a partner in the law firm LeBoeuf, Lamb, Xxxxxx &
XxxXxx.
Xxxxxxx X. Xxxxxxxx* Xxxxxxx X. Xxxxxxxx has been a Director of
000 Xxxx 00xx Xxxxxx Insignia since August 1993. For more than the
New York, NY 10022 past five years, Xx. Xxxxxxxx'x principal
occupation has been as a self-employed consultant
in the real estate business, including ownership,
management and lending.
Xxxx Xxxxxx* Xxxx Xxxxxx has been a Director of Insignia since
000 X. Xxxx Xxxxxx August 1993. For more than the past five years,
Greenville, SC 29601 Xx. Xxxxxx'x principal occupation has been to
serve as Chairman of the Board and Chief
Executive Officer of RSI Holdings, a company
which distributes outdoor equipment. Xx. Xxxxxx
is also a director of The Liberty Corporation,
NationsBank Corporation, Emergent Group, Inc.,
Delta Woodside Industries, Inc., 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), with the
Office of the Chairman (since July 1994) and
Executive Managing Director of Investment Banking
of Insignia (since January 1991).
S-4
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx'x principal employment has been
0000 Xxxxxxxx Xxxxx Xxxx. with Realty One, Inc., a wholly-owned subsidiary
Cleveland, OH 44131 of Insignia ("Realty One"), for more than the
past five years. Xx. Xxxxx currently serves as
Chairman and Chief Executive Officer of Realty
One (since October 1997).
Xxxxxxx X. Xxxxxxx Xx. Xxxxxxx currently serves as a Director and
0000 Xxxxxxxx Xxxxx Xxxx. Chief Operating Officer of Realty One (since
Cleveland, OH 44131 October 1997). From 1994 to 1997, Xx. Xxxxxxx was
the President of Realty One. Prior to 1994, Xx.
Xxxxxxx was the Chief Financial Officer and
Executive Vice President of Xxxxxxxx, Inc., a
full service advertising agency.
Xxxx X.X. Xxxxxxxxx Xxxx X.X. Xxxxxxxxx'x principal employment has
Berkeley Square House been with Xxxxxxx Xxxxx for more than the past
London W1X 6AN five years. Xx. Xxxxxxxxx currently serves as a
England Managing Director of Insignia for Xxxxxxx Xxxxx
(since Insignia's acquisition of Xxxxxxx Xxxxx in
1998) and has been a director of Xxxxxxx Xxxxx
since its inception in 1997. Xx. Xxxxxxxxx is a
citizen of the United Kingdom.
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.
Xxxx X. Xxxxxxxx Xxxx X. Xxxxxxxx'x principal employment has been
Berkeley Square House with Xxxxxxx Xxxxx for more than the past five
London W1X 6AN years. Xx. Xxxxxxxx currently serves as Chief
England Executive Officer of Xxxxxxx Xxxxx (since
Insignia's acquisition of Xxxxxxx Xxxxx in 1998).
Xx. Xxxxxxxx is a citizen of the United Kingdom.
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx'x principal employment has been
000 Xxxxxxxx Xxxxxxxxx with Insignia for more than the past five years.
Suite 400 Xx. Xxxxxxxx currently serves as an Executive
Nashville, TN 37205 Managing Director of Insignia (since July 1994)
and as President of Insignia Financial Services,
a division of Insignia (since July 1994).
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx has been General Counsel and
000 Xxxx Xxxxxx Secretary of Insignia since March 1998. Prior to
New York, NY 10166 that time, Xx. Xxxxxxx'x principal occupation was
as a partner with the law firm of Nixon,
Hargrave, Devans & Xxxxx, LLP, New York, New
York.
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx'x principal employment has
000 Xxxx Xxxxxx been with Insignia for more than the past five
New York, NY 10166 years. Xx. Xxxxxxxx currently serves as a
Managing Director -- Investment Banking of
Insignia (since July 1994).
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx has been with the Office of the
000 Xxxx Xxxxxx Chairman of Insignia and has been Chairman of
New York, NY 10166 Insignia/ESG, Inc. since July 1996. Prior to July
1996, Xx. Xxxxxx'x principal employment for more
than the prior five years was as a founder and
Chairman of Xxxxxx X. Xxxxxx Company,
Incorporated ("ESG"), a commercial property
management and brokerage firm located in New
York, New York that was acquired by Insignia in
June 1996.
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx'x principal employment has been
with Insignia for more than the past five years.
Xx. Xxxxxxx currently serves as a Senior Vice
President of Insignia (since July 1994) and as
Chief Information Officer of Insignia (since
January 1991).
S-5
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X.X. Xxxxxxx Xxxxxx Xxxxxxx'x principal employment has
Berkeley Square House been with Xxxxxxx Xxxxx Group Limited, a
London W1X 6AN wholly-owned U.K. subsidiary of Insignia
England ("Xxxxxxx Xxxxx"), for more than the past five
years. Xx. Xxxxxxx currently serves as Chairman
of Xxxxxxx Xxxxx (since Insignia's acquisition of
Xxxxxxx Xxxxx in 1998). Xx. Xxxxxxx is a citizen
of the United Kingdom.
Xxxx Xxxxxxx Xxxx Xxxxxxx has been an Executive Managing
000 Xxxxx Xxxxxx Director of Insignia since September 1995 and
New York, NY 10022 President of Insignia Residential Group since
September 1997. Xx. Xxxxxxx has also served as
President of Insignia Management Services -- New
York, Inc., a subsidiary of Insignia, since
September 1995. 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.
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, FSB located
in Greenville, South Carolina.
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 a Managing Director of
000 Xxxx Xxxxxx Insignia since June 1996, President of Insignia
New York, NY 10166 Commercial Group since January 1997 and President
of Insignia/ESG, Inc. since June 1996. From
February 1992 until July 1996, Xx. Xxxxxx'x
principal employment was as President of ESG. Xx.
Xxxxxx currently serves as a Director of Liberty
Property Trust and Tower Realty, Inc.
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. Xx. Xxxxxx has also
served as the Chief Financial Officer and
Controller of MAG since September 1990.
S-6
SCHEDULE IV
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
Johnstown/Consolidated Income Partners
Multi-Benefit Realty Fund 87-1
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 Growth Fund XXII
Fox Strategic Housing Income Partners
Davidson Growth Plus, X.X.
Xxxxxxxx Diversified Real Estate II, X.X.
Xxxxxxxx Income Real Estate, L.P.
HCW Pension Real Estate Fund
Angeles Income Properties, Ltd. II
Angeles Income Properties, Ltd. IV
Angeles Income Properties, Ltd. 6
Angeles Opportunity Properties, Ltd.
Angeles Partners IX
Angeles Partners XII
S-7
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)
