Offer to Purchase for Cash
Up to 27,000 Units of Limited Partnership Interest
in
CENTURY PROPERTIES FUND XIX,
a California limited partnership
for
$175 Net Per Unit
by
IPLP ACQUISITION I LLC
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THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK TIME, ON SEPTEMBER 25, 1997, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------
IMPORTANT
IPLP Acquisition I LLC, a Delaware limited liability company (the
"Purchaser"), is offering to purchase up to 27,000 of the outstanding units of
limited partnership interest ("Units") in Century Properties Fund XIX, a
California limited partnership (the "Partnership"), at a purchase price of
$175 per Unit (the "Purchase Price"), net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Assignment of Partnership Interest (which,
together with any supplements or amendments, collectively constitute the
"Offer"). The Purchase Price is subject to adjustment under certain
circumstances, as described herein. Holders of Units (each, a "Limited
Partner") who tender their Units in response to the Offer will not be
obligated to pay any commissions or partnership transfer fees. The Purchaser
is an affiliate of Fox Partners II, which is the general partner of the
Partnership (the "General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of
and controlled by Insignia Properties Trust ("IPT"), which is
controlled by Insignia Financial Group, Inc. ("Insignia"). IPT,
through its operating partnership Insignia Properties, L.P.
("IPLP"), currently owns 25,147.66 Units.
o The net liquidation value per Unit (the "Estimated Liquidation
Value") estimated by the Purchaser (which is an affiliate of
the General Partner) is $262.35. The Purchaser does not
believe, however, that the Estimated Liquidation Value
represents a fair estimate of the market value of a Unit,
primarily due to the fact that such estimate does not take into
account timing considerations and legal and other expenses that
would be incurred in connection with a liquidation of the
Partnership. See Section 13. Accordingly, the Purchaser does
not believe that the Estimated Liquidation Value should be
viewed as representative of the amount a Limited Partner can
realistically expect to obtain on a sale of a Unit in the near
term.
o The Purchaser will have the right to vote all Units acquired
pursuant to the Offer. If the Purchaser (which is an affiliate
of the General Partner) is successful in acquiring more than
19,498.34 Units, IPT will own in excess of 50% of the total
Units outstanding and, accordingly, will be able to control the
outcome of almost all voting decisions with respect to the
Partnership, including decisions regarding liquidation,
amendments to the Limited Partnership Agreement, removal and
replacement of the General Partner and mergers, consolidations
and other extraordinary transactions not involving a "roll-up."
Even if the Purchaser acquires a lesser number of Units
pursuant to the Offer, however, because IPT already owns
(through IPLP) approximately 28.2% of the outstanding Units it
will be able to significantly influence the outcome of almost
all voting decisions with respect to the Partnership (other
than decisions involving "roll-up" transactions prior to
January 1, 2000).
o Between October 1994 and June 1995, XxXxxxxx Ventures I, L.P.
("XxXxxxxx"), which at the time was an affiliate of the General
Partner but was not an affiliate of Insignia, IPT or the
Purchaser, acquired 24,812 (or approximately 27.8%) of the
outstanding Units, at a purchase price of $65.70 per Unit,
pursuant to a series of tender offers. In a series of
transactions that occurred during the first half of 1996,
Insignia (through various affiliates) acquired a controlling
interest in the General Partner and all of the Units owned by
XxXxxxxx. Currently, IPT controls the General Partner and IPLP
owns all of the Units previously held by XxXxxxxx.
o The Purchaser (which is an affiliate of the General Partner) is
making the Offer with a view to making a profit. Accordingly,
there is a conflict between the desire of the Purchaser (which
is an affiliate of the General Partner) to purchase Units at a
low price and the desire of the Limited Partners to sell their
Units at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Units should complete and sign
the Assignment of Partnership Interest (or a copy thereof) 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.
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
August 28, 1997
TABLE OF CONTENTS
PAGE
----
INTRODUCTION.................................................................................................... 1
The Purchaser; Affiliation with the General Partner......................................................... 1
Some Factors to Be Considered by Limited Partners........................................................... 1
Reasons for and Effects of the Offer........................................................................ 3
Certain Tax Considerations.................................................................................. 3
Originally Anticipated Term of the Partnership; General Policy Regarding
Sales and Refinancings of Partnership Properties; Alternatives.......................................... 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.......................................................... 6
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.............................................................. 7
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.................................................................................. 9
Unrealized Receivables and Certain Inventory............................................................ 10
Passive Activity Loss Limitation........................................................................ 10
Partnership Termination................................................................................. 11
Backup Withholding and FIRPTA Withholding............................................................... 11
Section 7. Effects of the Offer............................................................................ 12
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act.......................... 12
Control of Limited Partner Voting Decisions by Purchaser;
Effect of Relationship with General Partner.......................................................... 12
Section 8. Future Plans of Insignia, IPT and the Purchaser................................................. 13
Section 9. Certain Information Concerning the Partnership.................................................. 13
General ............................................................................................. 14
Originally Anticipated Term of Partnership; Alternatives................................................ 14
General Policy Regarding Sales and Refinancings of Partnership Properties............................... 14
Selected Financial and Property-Related Data............................................................ 14
Cash Distributions History.............................................................................. 17
Operating Budgets of the Partnership.................................................................... 17
Section 10. Conflicts of Interest and Transactions with Affiliates......................................... 18
Conflicts of Interest with Respect to the Offer......................................................... 18
Voting by the Purchaser................................................................................. 18
Financing Arrangements.................................................................................. 18
i
PAGE
----
Transactions with Affiliates............................................................................ 19
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia........................... 19
The Purchaser........................................................................................... 19
IPT and IPLP............................................................................................ 19
Insignia ............................................................................................. 21
Section 12. Source of Funds................................................................................ 23
Section 13. Background of the Offer........................................................................ 23
Affiliation with the General Partner and NPI-AP......................................................... 23
Previous Tender Offers.................................................................................. 23
Determination of Purchase Price......................................................................... 23
Section 14. Conditions of the Offer........................................................................ 29
Section 15. Certain Legal Matters.......................................................................... 30
General ............................................................................................. 30
Antitrust ............................................................................................. 30
Margin Requirements..................................................................................... 30
Section 16. Fees and Expenses.............................................................................. 30
Section 17. Miscellaneous.................................................................................. 30
SCHEDULE I - Transactions in the Units Effected by IPLP in the Past 60 Days...........................S-1
SCHEDULE II - Information Regarding the Managers of the Purchaser......................................S-2
SCHEDULE III - Information Regarding the Trustees and Executive Officers of IPT.........................S-3
SCHEDULE IV - Information Regarding the Directors and Executive Officers of Insignia...................S-5
SCHEDULE V - IPT Partnerships.........................................................................S-8
ii
TO THE LIMITED PARTNERS OF
CENTURY PROPERTIES FUND XIX
INTRODUCTION
IPLP Acquisition I LLC (the "Purchaser"), which is a Delaware limited
liability company and an affiliate of the General Partner, hereby offers to
purchase up to 27,000 Units, representing approximately 30% of the Units
outstanding, at a purchase price of $175 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"). Limited Partners who tender their Units
in response to the Offer will not be obligated to pay any commissions or
partnership transfer fees; those fees will be paid by the Purchaser. 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 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. 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; Affiliation with the General Partner. Fox Partners II,
a California general partnership, is the general partner of the Partnership
(the "General Partner") and is controlled by Insignia Properties Trust, a
Maryland real estate investment trust ("IPT"). The Purchaser is a
newly-formed, wholly-owned subsidiary of Insignia Properties, L.P., a Delaware
limited partnership ("IPLP"), which is the operating partnership of IPT. IPT
is the sole general partner of IPLP (owning approximately 68% 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 32% of the total equity interests in IPLP). Insignia and its
affiliates also own approximately 70% of the outstanding common shares of IPT.
NPI-AP Management, L.P. ("NPI-AP"), which since mid-January 1996 has been an
affiliate of Insignia and is an affiliate of IPT and the Purchaser, provides
property management services to the Partnership, and since mid-January 1996
Insignia (directly or through affiliates) has performed asset management and
partnership administration 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 Section 10.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser and the General Partner are affiliates of and
controlled by IPT, which is controlled by Insignia. The General
Partner has conflicts of interest in considering the Offer,
including (i) as a result of the fact that a sale or
liquidation of the Partnership's assets would result in a
decrease or elimination of the fees paid to the General Partner
and/or its affiliates and (ii) the fact that as a consequence
of the Purchaser's ownership of Units, the Purchaser (which is
an affiliate of the General Partner) may have incentives to
seek to maximize the value of its ownership of Units, which in
turn may result in a conflict for the General Partner in
attempting to reconcile the interests of the Purchaser (which
is an affiliate of the General Partner) with the interests of
the other Limited Partners. See Section 10.
o The net liquidation value per Unit (the "Estimated Liquidation
Value") estimated by the Purchaser (which is an affiliate of
the General Partner) is $262.35. See Section 13 for a
discussion of why the Purchaser (which is an affiliate of the
General Partner) believes that the Estimated Liquidation
Value is not necessarily indicative of the fair market value of a
Unit. THE PURCHASER (WHICH IS AN AFFILIATE OF THE GENERAL
PARTNER) MAKES NO REPRESENTATION AND EXPRESSES NO OPINION AS TO
THE FAIRNESS OR ADEQUACY OF THE PURCHASE PRICE.
o As with any rational investment decision, the Purchaser (which
is an affiliate of the General Partner) is making the Offer
with a view to making a profit. Accordingly, there is a
conflict between the desire of the Purchaser (which is an
affiliate of the General Partner) to purchase Units at a low
price and the desire of the Limited Partners to sell their
Units at a high price.
o If the Purchaser is successful in acquiring more than 19,498.34
Units pursuant to the Offer, IPT (which is an affiliate of the
General Partner) will own in excess of 50% of the total Units
outstanding and, accordingly, will be able to control the
outcome of almost all voting decisions with respect to the
Partnership, including decisions concerning liquidation,
amendments to the Limited Partnership Agreement, removal and
replacement of the General Partner and mergers, consolidations
and other extraordinary transactions not involving a "roll-up."
Even if the Purchaser acquires a lesser number of Units
pursuant to the Offer, however, because IPT already owns
(through IPLP) approximately 28.2% of the outstanding Units it
will be able to significantly influence the outcome of almost
all voting decisions with respect to the Partnership. This
means that, other than with respect to "roll-up" transactions,
(i) non-tendering Limited Partners could be prevented from
taking action they desire but that IPT (which is an affiliate
of the General Partner) opposes and (ii) IPT (which is an
affiliate of the General Partner) may be able to take action
desired by IPT but opposed by the non-tendering Limited
Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available to
Limited Partners wishing to sell their Units, there is no
formal trading market for Units. 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 4%
greater than the highest reported secondary market sales price
of any Unit during in the past six months (based on published
information and information provided by the General Partner).
However, reported secondary market sales prices do not take
into account commissions and transfer fees typically payable by
a Limited Partner in connection with a secondary market sale.
Therefore, the actual proceeds received by a Limited Partner
who sells Units in the secondary market are typically
significantly less than the reported sales prices.
o LIMITED PARTNERS WHO SELL UNITS PURSUANT TO THE OFFER WILL NOT
BE CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE FROM 3%
TO 10% OF THE SALES PRICE) OR PARTNERSHIP TRANSFER FEES (WHICH
ARE TYPICALLY $100 PER TRANSFER). The Purchaser will pay all
transfer fees imposed by the Partnership in connection with
sales of Units pursuant to the Offer.
o Real estate markets in the United States generally have
recovered and experienced an upward trend since the end of the
last recession. That recovery and upward trend might continue.
On the other hand, those markets also may be adversely affected
by a variety of factors, including possible fluctuations in
interest rates, economic slowdowns and overbuilding.
Accordingly, ownership of Units continues to be a speculative
investment. THE OFFER MAY PROVIDE LIMITED PARTNERS WITH THE
OPPORTUNITY TO LIQUIDATE THEIR INTERESTS IN THE PARTNERSHIP AND
REPLACE THEM WITH INVESTMENTS THAT ARE LESS SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to
avoid in the future the expenses, delays and complications in
filing personal income tax returns which may be caused by
ownership of Units. In addition, A LIMITED PARTNER WHO SELLS
100% OF ITS UNITS PURSUANT TO THE OFFER WILL
2
NO LONGER BE SUBJECT TO THE PASSIVE ACTIVITY LOSS LIMITATION WITH
RESPECT TO "SUSPENDED" LOSSES ATTRIBUTABLE TO THOSE UNITS AND,
THEREFORE, WILL BE ABLE TO UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who have
become disenchanted with real estate investments generally, and
in particular with the perceived illiquidity of investments
made through limited partnerships, because it may afford an
immediate opportunity for those Limited Partners to liquidate
their investments in the Partnership. On the other hand,
Limited Partners who tender their Units will be giving up the
opportunity to participate in any potential future benefits
represented by the ownership of those Units, including, for
example, the right to participate in any future distributions
of cash or property, whether from operations, the proceeds of a
sale or refinancing of one or more of the Partnership's
properties or in connection with any future liquidation of the
Partnership. Instead, any such distributions of cash or
property with respect to Units tendered in the Offer and
purchased by the Purchaser will be paid to the Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Units and has been advised by the General Partner that the General
Partner also expects to make no recommendation. Each Limited Partner must make
its own decision, based on the Limited Partner's particular circumstances, as
to whether to tender Units and, if so, how many Units to tender. Limited
Partners should consult with their respective advisors regarding the
financial, tax, legal and other implications of accepting the Offer. LIMITED
PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. If the
Purchaser (which is an affiliate of the General Partner) is successful in
acquiring more than 19,498.34 Units pursuant to the Offer, IPT will own in
excess of 50% of the total Units outstanding and, accordingly, will be able to
control the outcome of almost all votes by Limited Partners, other than voting
decisions concerning "roll-up" transactions prior to January 1, 2000, which
require the approval of Limited Partners holding at least a majority of the
outstanding Units not held by persons affiliated with the General Partner.
Even if the Purchaser acquires a lesser number of Units pursuant to the Offer,
however, because IPT already owns (through IPLP) approximately 28.2% of the
outstanding Units it will be able to significantly influence the outcome of
almost all voting decisions with respect to the Partnership not involving a
"roll-up" transaction. See Sections 8 and 10.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Units sold over such
Limited Partner's adjusted tax basis in those Units. In the case of a Limited
Partner who is an individual and who has held Units since their issue by the
Partnership, the sale is expected to result in a gain, which may be taxable as
ordinary income, capital gain or gain from real estate depreciation recapture.
Limited Partners who have suspended "passive losses" from the Partnership or
other passive activity investments generally may deduct these losses up to the
amount of 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 September 20, 1983, the
General Partner anticipated that the Partnership would sell its properties
five to eight years after their acquisition, depending upon the then current
real estate and money markets, economic climate and income tax consequences to
the Limited Partners. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market
conditions. The General Partner monitors each property's specific locale and
sub-market conditions evaluating current trends, competition, new construction
and economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement requirements.
In addition, the financing structure
3
for each property, tax implications and the investment climate are all
considered. Any of these factors, and possibly others, could potentially
contribute to any decision of the General Partner to sell, refinance, upgrade
with capital improvements or hold a particular Partnership property. The
General Partner has advised the Purchaser that it is currently in negotiations
with the lenders with respect to refinancing the $12,510,000 aggregate
mortgage debt encumbering the XxXxxxxx Place Apartments complex which matured
in January 1997 and has not been repaid. This debt is non-recourse to the
Partnership, and the General Partner believes that the value of the property
is less than the amount of the debt encumbering it. Based on the above
considerations and except for the potential refinancing of XxXxxxxx Place
Apartments, the General Partner has determined that it is not in the best
interest of Limited Partners to sell or refinance any other property at the
present time. Under the Limited Partnership Agreement the term of the
Partnership will continue until December 31, 2007, unless sooner terminated as
provided in the Limited Partnership Agreement or by law. Limited Partners
could, as an alternative to tendering their Units, take a variety of possible
actions, including voting to liquidate the Partnership or causing the
Partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however.
See Section 14.
Distributions. No cash distributions have been made by the
Partnership to Limited Partners since 1987, and, in total, original investors
in the Partnership have received only $25 of their original $1,000 investment
made in 1983. See Section 9. The Purchaser believes that the Partnership will
be able to generate positive cash flow from operations in the future, although
there can be no assurance as to whether any such distributions will actually
be made or as to the amounts of any such distributions. The potential for
future distributions was, however, 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 the distributions made through August 28, 1997, and will be entitled to
receive 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 distribution will result in a reduction of the Purchase Price, as
described in Section 1. However, tendering Limited Partners will not be
entitled to receive 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 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 August 1, 1997 there were 89,292 Units issued and
outstanding, which were held of record by 6,691 Limited Partners. IPLP
currently owns 25,147.66 Units. See Schedule I to this Offer to Purchase for a
list of transactions in the Units effected by IPLP within the past 60 days.
4
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 27,000 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 September 25, 1997, 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 AUGUST 28, 1997 AND PRIOR TO THE DATE ON WHICH THE
PURCHASER PAYS FOR UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) increases the consideration offered to
Limited Partners pursuant to the Offer, the increased consideration will be
paid for all Units accepted for payment pursuant to the Offer, regardless of
whether the Units were tendered prior to the increase in the consideration
offered.
If more than 27,000 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 27,000
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 purchases of fractional
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 27,000 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, due to the
difficulty of determining the number of Units validly tendered and not
withdrawn, the Purchaser (which is an affiliate of the General Partner) may
not be able to announce the final results of such proration until at least
approximately seven business days after the Expiration Date. Subject to the
Purchaser's obligation under Rule 14e-1(c) under the 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 August 1, 1997.
5
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Units validly tendered and not withdrawn in
accordance with the procedures specified in Section 4, as promptly as
practicable following the Expiration Date. A tendering beneficial owner of
Units whose Units are owned of record by an IRA or other qualified plan will
not receive direct payment of the Purchase Price; rather, payment will be made
to the custodian of such account or plan. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of a properly completed and duly executed Assignment of Partnership
Interest and any other documents required by the Assignment of Partnership
Interest. See Section 3. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of
the General Partner) will be deemed to have accepted for payment pursuant to
the Offer, and thereby purchased, validly tendered Units if, as and when the
Purchaser (which is an affiliate of the General Partner) gives verbal or
written notice to the Depositary of the Purchaser's acceptance of those Units
for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Units accepted for payment pursuant to
the Offer will be made by deposit of the Purchase Price with the Depositary,
which will act as agent for tendering Limited Partners for the purpose of
receiving payments from the Purchaser and transmitting those payments to
Limited Partners whose Units have been accepted for payment.
If any tendered Units are not purchased for any reason, the
Assignment of Partnership Interest with respect to such Units will be
destroyed by the Purchaser (which is an affiliate of the General Partner). If
for any reason acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Purchaser is unable to accept for
payment, purchase or pay for Units tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights under Section 14, the Depositary
may, nevertheless, on behalf of the Purchaser (which is an affiliate of the
General Partner) retain tendered Units, and those Units may not be withdrawn
except to the extent that the tendering Limited Partners are entitled to
withdrawal rights as described in Section 4; subject, however, to the
Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay
Limited Partners the Purchase Price in respect of Units tendered or return
those Units promptly after termination or withdrawal of the Offer.
The Purchaser (which is an affiliate of the General Partner) reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of the Purchaser's affiliates, the right to purchase Units tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer or prejudice the rights of
tendering Limited Partners to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Units must be validly tendered and not withdrawn on or prior
to the Expiration Date. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest and any other documents required
by the Assignment of Partnership Interest must be received by the Depositary,
at its address set forth on the back cover of this Offer to Purchase, on or
prior to the Expiration Date. A Limited Partner may tender any or all of the
Units owned by that Limited Partner. 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. ALL SIGNATURES ON THE ASSIGNMENT OF
PARTNERSHIP INTEREST MUST BE GUARANTEED BY A BANK, BROKER, DEALER, CREDIT
UNION, SAVINGS ASSOCIATION OR OTHER ENTITY WHICH IS A MEMBER IN GOOD STANDING
OF THE SECURITIES TRANSFER MEDALLION PROGRAM (EACH AN "ELIGIBLE INSTITUTION").
Please note that a notarization is not the same thing as a signature
guarantee, and a notarization of the Assignment of Partnership Interest will
not be sufficient.
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
6
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 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
7
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 October 26, 1997. For withdrawal to be effective,
a written 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.
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.
8
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser (which is an affiliate of the General Partner) expressly reserves
the right, in its sole discretion, at any time and from time to time, (i) to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, validly tendered Units, (ii)
to terminate the Offer and not accept for payment any Units not already
accepted for payment or paid for, (iii) upon the occurrence of any of the
conditions specified in Section 14, to delay the acceptance for payment of, or
payment for, any Units not already accepted for payment or paid for, and (iv)
to amend the Offer in any respect (including, without limitation, by
increasing the consideration offered, increasing or decreasing the number of
Units being sought, or both). Notice of any such extension, termination or
amendment will be disseminated promptly to Limited Partners in a manner
reasonably designed to inform Limited Partners of such change in compliance
with Rule 14d-4(c) under the Exchange Act. In the case of an extension of the
Offer, the extension will be followed by a press release or public
announcement which will be issued no later than 9:00 a.m., New York City time,
on the next business day after the then scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Units) is delayed in its payment for Units or is unable to pay
for Units pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Units
and those Units may not be withdrawn except to the extent tendering Limited
Partners are entitled to withdrawal rights as described in Section 4; subject,
however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Limited Partners the Purchase Price in respect of Units
tendered or return those Units promptly after termination or withdrawal of the
Offer.
If the Purchaser (which is an affiliate of the General Partner) makes
a material change in the terms of the Offer or the information concerning the
Offer or waives a material condition of the Offer, the Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer will depend upon
the facts and circumstances, including the relative materiality of the change
in the terms or information. In the Commission's view, an offer should remain
open for a minimum of five business days from the date the material change is
first published, sent or given to securityholders, and if material changes are
made with respect to information that approaches the significance of price or
the percentage of securities sought, a minimum of ten business days may be
required to allow for adequate dissemination to securityholders and investor
response. As used in this Offer to Purchase, "business day" means any day
other than a Saturday, Sunday or a federal holiday, and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Units pursuant to the Offer.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations thereunder, administrative rulings,
practice and procedures and judicial authority, all as of the date of the
Offer. All of the foregoing are subject to change, and any such change could
affect the continuing accuracy of this summary. This summary does not discuss
all aspects of federal income taxation that may be relevant to a particular
Limited Partner in light of such Limited Partner's specific circumstances or
to certain types of Limited Partners subject to special treatment under the
federal income tax laws (for example, foreign persons, dealers in securities,
banks, insurance companies and tax-exempt organizations), nor (except as
otherwise expressly indicated) does it describe any aspect of state, local,
foreign or other tax laws. Sales of Units pursuant to the Offer will be
taxable transactions for federal income tax purposes, and also may be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
LIMITED PARTNER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH LIMITED PARTNER OF SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Limited Partner's "amount realized" on the sale and (ii) the
Limited Partner's adjusted tax basis in the Units sold. Generally, a Limited
Partner's adjusted tax basis with
9
respect to a Unit equals its cost, increased by the amount of income and the
amount of Partnership liabilities (as determined under Code Section 752)
allocated to the Unit, and decreased by (i) any distributions made with
respect to such Unit, (ii) the amount of deductions or losses allocated to the
Unit and (iii) any decrease in the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit. Thus, the amount of
a Limited Partner's adjusted tax basis in tendered Units will vary depending
upon the Limited Partner's particular circumstances. The "amount realized"
with respect to a Unit will be a sum equal to the amount of cash received by
the Limited Partner for the Unit pursuant to the Offer, plus the amount of the
Partnership's liabilities allocable to the Unit (as determined under Code
Section 752). Limited Partners who purchased their interests from the
Partnership in the original issue of the Units are expected to recognize
taxable gain on the sale in an amount in excess of the cash purchase price.
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held
by the Limited Partner as a capital asset. Under the Taxpayer Relief Act of
1997, the capital gains rate for individuals and other non-corporate taxpayers
is reduced to 20% for sales of capital assets after July 28, 1997 if such
assets were held for more than 18 months. However, any gain from the sale of
such assets attributable to the recapture of depreciation with respect to real
property (as defined in Code Section 1250) is taxed at a maximum rate of 25%.
The 28% rate continues to apply to individual and noncorporate taxpayers who
sell a capital asset held for more than one year but not more than 18 months.
Corporate taxpayers are taxed at a maximum marginal rate of 35% for both
capital gains and ordinary income. The maximum marginal federal income tax
rate for ordinary income of individuals and other noncorporate taxpayers is
39.6%. Capital losses are deductible only to the extent of capital gains,
except that, subject to the passive activity loss limitations discussed below,
non-corporate taxpayers may deduct up to $3,000 of capital losses in excess of
the amount of their capital gains against ordinary income. Excess capital
losses generally can be carried forward to succeeding years (a corporation's
carryforward period is five years and a non-corporate taxpayer can carry
forward such losses indefinitely); and a corporation is permitted to carry
back excess capital losses to the three preceding taxable years, provided the
carryback does not increase or produce a net operating loss for any of those
years.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Limited Partnership
Agreement concerning transfers of Units. Such allocation and any cash
distributed by the Partnership to the Limited Partner for that year will
affect the Limited Partner's adjusted tax basis in Units and, therefore, the
amount of such Limited Partner's taxable gain or loss upon a sale of Units
pursuant to the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain realized by a Limited Partner is attributable to "unrealized
receivables" (which includes depreciation recapture) or "substantially
appreciated inventory" as defined in Code Section 751, then a portion of the
Limited Partner's gain or loss may be ordinary rather than capital and, in
addition, a portion of such gain may be taxed at the 25% rate discussed above.
A portion, if not all, of the gain upon the sale of Units is expected to be
attributable to unrealized receivables. A Limited Partner who tenders Units
which are purchased pursuant to the Offer must file an information statement
with such Limited Partner's federal income tax return for the year of the sale
which provides the information specified in Treasury Regulation ss.
1.751-1(a)(3). A selling Limited Partner also must notify the Partnership of
the 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. Substantially all post-1986 losses of Limited
Partners from the Partnership are believed to be 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). Substantially all gain from a sale of Units pursuant to the Offer
will be passive income.
10
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses 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. A tendering Limited Partner must sell all of its Units to receive
these tax benefits. If more than 27,000 of the outstanding Units are tendered,
some tendering Limited Partners may not be able to sell 100% of their Units
pursuant to the Offer because of proration of the number of Units to be
purchased by the Purchaser. See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). Accordingly, it is possible that transfers of Units made pursuant to
the Offer, in combination with other transfers made within twelve months of
the Offer, will result in a termination of the Partnership. In the event of a
termination, the Partnership's tax year would close and the Partnership would
be treated for income tax purposes as if it had contributed all of its assets
and liabilities to a "new" partnership in exchange for an interest in the
"new" partnership. The Partnership would then be treated as making a
distribution of the interests in the "new" partnership to the new partners and
the remaining partners, followed by the liquidation of the Partnership.
Because the "new" partnership would be treated as having acquired its assets
on the date of the deemed contribution, a new depreciation recovery period
would begin on such date, and the Partnership's annual depreciation deductions
over the next few years would be substantially reduced, and the Partnership
would have greater taxable income (or less tax loss) than if no tax
termination occurred. In addition, depreciation may be required to be
allocated to those Limited Partners that have a higher tax basis, such as the
Purchaser. A tax termination will not affect a Limited Partner who sells all
of his Units but will affect the taxation of a Limited Partner in respect of
any Units retained after the date of the tax termination. A tax termination of
the Partnership will also terminate any partnership in which the Partnership
holds a majority interest (50% or more).
The Purchaser believes that even if the maximum number of Units is
purchased pursuant to the Offer, those transfers will not cause a tax
termination.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Units may be subject to 31% backup withholding unless those Limited
Partners provide a taxpayer identification number ("TIN") and certify that the
TIN is correct or properly certify that they are awaiting a TIN. A Limited
Partner may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Assignment of Partnership
Interest. If a 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.
11
SECTION 7. EFFECTS OF THE OFFER.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Units are purchased pursuant to the
Offer, the result will be a reduction in the number of Limited Partners. In
the case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Units and,
therefore, the Purchaser (which is an affiliate of the General Partner) does
not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for their
Units through secondary market transactions. See Section 13 for certain
limited information regarding recent secondary market sales of the Units.
The Units are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser (which is an affiliate of the General Partner) does not
expect or intend that consummation of the Offer will cause the Units to cease
to be registered under Section 12(g) of the Exchange Act. If the Units were to
be held by fewer than 300 persons, the Partnership could apply to de-register
the Units under the Exchange Act. Because the Units are widely held, however,
the Purchaser (which is an affiliate of the General Partner) believes that,
even if it purchases the maximum number of Units in the Offer, after that
purchase the Units will be held of record by substantially more than 300
persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser and its managers and designees as
proxies with respect to the Units tendered by such Limited Partners and
accepted for payment by the Purchaser.
See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 19,498.34 Units pursuant to the Offer (or
otherwise), IPT (which controls the General Partner, IPLP and the Purchaser)
will own in excess of 50% of the total outstanding Units and, as a result,
will be able to control the outcome of almost all voting decisions with
respect to the Partnership, other than decisions concerning a "roll-up"
transaction prior to January 1, 2000. Even if the Purchaser acquires a lesser
number of Units pursuant to the Offer, however, because IPT already owns
(through IPLP) approximately 28.2% of the outstanding Units, it will be able
to significantly influence the outcome of almost all voting decisions with
respect to the Partnership. This could (i) prevent non-tendering Limited
Partners from taking action they desire but that IPT opposes and (ii) enable
IPT to take action desired by IPT but opposed by non-tendering Limited
Partners. Under the Limited Partnership Agreement, Limited Partners holding a
majority of the Units are entitled to take action with respect to a variety of
matters, including: removal of a general partner and in certain circumstances
election of new or successor general partners; dissolution of the Partnership;
the sale of all or substantially all of the assets of the Partnership; and
most types of amendments to the Limited Partnership Agreement. However, under
the terms of the Stipulation (as defined in Section 13), the General Partner
is required to prohibit the Partnership from entering into a "roll-up"
transaction involving the General Partner or any of its affiliates prior to
January 1, 2000 unless such "roll-up" transaction is approved by Limited
Partners holding at least a majority of the outstanding Units not held by
persons affiliated with the General Partner. 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.
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
12
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 the Purchaser itself, depending among other
things on the requirements from time to time of Insignia, IPT and their
affiliates in light of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to a liquidation of
the Partnership or a sale or refinancing of any of the Partnership's
properties. However, IPT and the Purchaser expect that consistent with the
General Partner's fiduciary obligations, the General Partner will seek and
review opportunities (including opportunities identified by IPT and the
Purchaser) to engage in transactions which could benefit the Partnership, such
as sales or refinancings of assets or a combination of the Partnership with
one or more other entities, with the objective of seeking to maximize returns
to Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as
part of a complete liquidation; and (iv) mergers or other consolidation
transactions involving the Partnership. Any such merger or consolidation
transaction could involve other limited partnerships in which the General
Partner or its affiliates serve as general partners, or a combination of the
Partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of IPT (which is an affiliate of the General Partner) or
IPT itself), in any of which Limited Partners might receive cash, common stock
or other securities or consideration. There is no assurance, however, as to
when or whether any of the transactions referred to above might occur. If any
such transaction is effected by the Partnership and financial benefits accrue
to the Limited Partners of the Partnership, the Purchaser (and thus IPT) will
participate in those benefits to the extent of its ownership of Units. A
merger or other consolidation transaction and certain kinds of other
extraordinary transactions would require a vote of the Limited Partners, and,
so long as such transaction does not involve a "roll-up" prior to January 1,
2000, if the Purchaser is successful in acquiring more than 19,498.34 Units
pursuant to the Offer (or otherwise), IPT will be able to control the outcome
of any such vote. If such a transaction does involve a "roll-up," however, it
must be approved by Limited Partners holding at least a majority of the
outstanding Units not held by persons affiliated with the General Partner.
Even if the Purchaser acquires a lesser number of Units pursuant to the Offer,
however, because IPT already owns (through IPLP) approximately 28.2% of the
outstanding Units it will be able to significantly influence the outcome of
almost all voting decisions with respect to the Partnership. IPT's primary
objective in seeking to acquire the Units through the Purchaser pursuant to
the Offer is not, however, to influence the vote on any particular
transaction, but rather to generate a profit on the investment represented by
those Units.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Except as
otherwise indicated, information contained in this Section 9 is based upon
documents and reports publicly filed by the Partnership with the Commission.
Although the Purchaser has no information that any statements contained in
this Section 9 are untrue, the Purchaser cannot take responsibility for the
accuracy or completeness of any information contained in this Section 9 which
is derived from such public documents, or for any failure by the Partnership
to disclose events which may have occurred and may affect the significance or
accuracy of any such information but which are unknown to the Purchaser.
13
General. The Partnership was organized on August 16, 1982 under the
laws of the State of California. Its principal executive offices are located
at Xxx Xxxxxxxx Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its
telephone number at that address is (000) 000-0000.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was formed to invest in, acquire, manage
and ultimately sell income-producing real properties which are improved within
a reasonable period after acquisition. The Partnership's investment portfolio
currently consists of 8 residential apartment complexes: a 220-unit complex in
Atlanta, Georgia; a 336-unit complex in Phoenix, Arizona; a 432-unit complex
in Phoenix Arizona; a 280-unit complex in Atlanta, Georgia; a 180-unit complex
in Atlanta, Georgia; a 200-unit complex in St. Petersburg, Florida; a 402-unit
complex in Dallas, Texas; and a 228-unit complex in Charlotte, North Carolina.
Originally Anticipated Term of Partnership; Alternatives. According
to the Partnership's Prospectus dated September 20, 1983, the General Partner
anticipated that the Partnership would sell its properties after five to eight
years of ownership. Under the Limited Partnership Agreement, the term of the
Partnership will continue until December 31, 2007, unless sooner terminated as
provided in the Limited Partnership Agreement or by law. Limited Partners
could, as an alternative to tendering their Units, take a variety of possible
actions including voting to liquidate the Partnership or causing the
Partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market
conditions. The General Partner monitors each property's specific locale and
sub-market conditions evaluating current trends, competition, new construction
and economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement requirements.
In addition, the financing structure for each property, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision of the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. The General Partner has advised the Purchaser that it is
currently in negotiations with the lenders with respect to refinancing the
$12,510,000 aggregate mortgage debt encumbering the XxXxxxxx Place Apartments
complex which matured in January 1997 and has not been repaid. This debt is
non-recourse to the Partnership, and the General Partner believes that the
value of the property is less than the amount of the debt encumbering it.
There can be no assurance, however, that the Partnership will be able to
refinance this debt. There are no other plans to sell or refinance any
property at the present time.
Selected Financial and Property-Related Data. Set forth below is a
summary of certain financial and statistical information with respect to the
Partnership and its properties, all of which has been excerpted or derived
from the Partnership's Annual Reports on Form 10-KSB for the year ended
December 31, 1996 and on Form 10-K for the years ended December 31, 1995,
1994, 1993 and 1992 and the Partnership's Quarterly Reports on Form 10-QSB for
the periods ended June 30, 1997 and 1996. More comprehensive financial and
other information is included in such reports and other documents filed by the
Partnership with the Commission, and the following summary is qualified in its
entirety by reference to such reports and other documents and all the
financial information and related notes contained therein.
14
CENTURY PROPERTIES FUND XIX
SELECTED FINANCIAL DATA
(in thousands, except per Unit data)
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 30, DECEMBER 31,
----------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- --------- ---------
(UNAUDITED)
Statements of Operations Data:
Rental Income................. $ 7,554 $ 7,457 $ 14,971 $ 14,454 $ 13,709 $ 14,052 $ 17,735
Other Income.................. $ 406 $ 381 $ 776 $ 625 $ 59 $ 638 $ 60
Total Revenues............. $ 7,960 $ 7,838 $ 15,747 $ 15,079 $ 13,768 $ 14,690 $ 17,795
Income (Loss) from Operations
(before extraordinary item) $ 96 $ (293) $ (948) $ (2,047) $ (3,105) $ (2,686) $ (8,310)
Net Income (Loss)............. $ 96 $ (293) $ (962) $ (3,683) $ (3,105) $ (2,686) $ (1,288)
Net Income (Loss) per Unit.... $ 0.95 $ (2.90) $ (9.50) $ (36.39) $ (30.67) $ (26.53) $ (13)
AS OF AS OF
JUNE 30, DECEMBER 31,
----------------------- -----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- --------- ----------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $ 63,136 $ 64,117 $ 63,240 $ 64,379 $ 64,604 $ 70,799 $ 99,401
Total Liabilities............. $ 63,339 $ 63,747 $ 63,539 $ 63,716 $ 60,258 $ 63,348 $ 89,264
Limited Partners' Equity ..... $ 8,892 $ 9,396 $ 8,807 $ 9,655 $ 12,904 $ 15,643 $ 18,012
Units Outstanding............. 89,292 89,292 89,292 89,292 89,292 89,292 89,292
Book Value per Unit........... $ 99.58 $ 105.23 $ 98.63 $ 108.13 $ 144.51 $ 175.19 $ 113.53
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
------------------------------------ ------- ----------------------------- ----------------------
Wood Lake Apartments 12/83 Fee ownership Residential Apartments
Atlanta, Georgia (subject to first mortgage) (220 units)
Greenspoint Apartments 02/84 Fee ownership Residential Apartments
Phoenix, Arizona (subject to first mortgage) (336 units)
Sandspoint Apartments 02/84 Fee ownership Residential Apartments
Phoenix, Arizona (subject to first mortgage) (432 units)
Wood Ridge Apartments 04/84 Fee ownership Residential Apartments
Atlanta, Georgia (subject to first mortgage) (280 units)
Plantation Crossing Apartments 06/84 Fee ownership Residential Apartments
Atlanta, Georgia (subject to first mortgage) (180 units)
Sunrunner Apartments 07/84 Fee ownership Residential Apartments
St. Petersburg, Florida (subject to first mortgage) (200 units)
XxXxxxxx Place Apartments 06/85 Fee ownership Residential Apartments
Dallas, Texas (subject to first and (402 units)
second mortgages)
Xxxxx Xxxxx Apartments 06/85 Fee ownership Residential Apartments
Charlotte, North Carolina (subject to first mortgage) (228 units)
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value, accumulated depreciation and federal tax basis of
each of the Partnership's properties as of December 31, 1996 ($ amounts in
thousands).
15
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
----------------------------------- -------------- ------------- ---------- ----------- -----------
Wood Lake Apartments $ 12,798 $ 5,299 5-30 yrs. S/L $ 3,856
Greenspoint Apartments 13,790 5,007 6-30 yrs. S/L 3,478
Sandspoint Apartments 16,043 6,058 6-30 yrs. S/L 3,779
Wood Ridge Apartments 14,734 5,875 6-30 yrs. S/L 4,609
Plantation Crossing Apartments 9,055 3,614 6-30 yrs. S/L 2,879
Sunrunner Apartments 7,264 3,160 6-30 yrs. S/L 2,385
XxXxxxxx Place Apartments 13,773 5,072 6-30 yrs. S/L 5,693
Xxxxx Xxxxx Apartments 7,552 3,061 6-30 yrs. S/L 2,534
---------- --------- ---------
TOTALS $ 95,009 $ 37,146 $ 29,213
========== ========= =========
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1996 ($ amounts in thousands).
PRINCIPAL MONTHLY PRINCIPAL
BALANCE AT STATED PAYMENT BALANCE
DECEMBER 31, INTEREST INCLUDING MATURITY DUE AT
PROPERTY 1996 RATE INTEREST DATE MATURITY
----------------------------------- --------------- ----------- ------------ ------------- ------------
Wood Lake Apartments $ 7,649 7.50% $ 57 01/01/03 $ 6,793
Greenspoint Apartments 8,900 8.33% 68 05/15/05 7,988
Sandspoint Apartments 9,887 8.33% 76 05/15/05 8,874
Wood Ridge Apartments 8,883 7.50% 67 01/01/03 7,888
Plantation Crossing Apartments 5,182 7.50% 39 01/01/03 4,602
Sunrunner Apartments 3,250 7.33% 20 11/01/03 3,250
XxXxxxxx Place Apartments
First Mortgage 10,370 8.25% 89 01/20/97 10,370
Second Mortgage 2,140 8.25% -- 01/20/97 2,140
Xxxxx Xxxxx Apartments 5,407 7.88% 40 01/01/06 $ 4,769
--------- ------- ---------
TOTALS $ 61,668 $ 456 $ 56,674
======== ====== =========
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.
RENTAL RATE AVERAGE ANNUAL OCCUPANCY
-------------------------------------------- ----------------------------
PROPERTY 1996 1995 1996 1995
----------------------------------- ---------------------- ---------------------- ------------------ ---------
Wood Lake Apartments $8,968/unit $8,370/unit 94% 96%
Greenspoint Apartments 7,686/unit 7,187/unit 92% 96%
Sandspoint Apartments 6,455/unit 6,149/unit 95% 96%
Wood Ridge Apartments 8,289/unit 7,799/unit 95% 95%
Plantation Crossing Apartments 8,028/unit 7,664/unit 94% 96%
Sunrunner Apartments 6,116/unit 5,849/unit 94% 95%
XxXxxxxx Place Apartments 5,942/unit 5,614/unit 94% 97%
Xxxxx Xxxxx Apartments 6,281/unit 5,931/unit 94% 97%
16
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1996 for each of the Partnership's
properties.
1996 1996
PROPERTY BILLING RATE
----------------------------------- ---------------- ----------
Wood Lake Apartments $ 123,000 3.27%
Greenspoint Apartments $ 100,000 1.30%
Sandspoint Apartments $ 133,000 1.51%
Wood Ridge Apartments $ 169,000 3.27%
Plantation Crossing Apartments $ 65,000 3.52%
Sunrunner Apartments $ 123,000 2.46%
XxXxxxxx Place Apartments $ 251,000 2.59%
Xxxxx Xxxxx Apartments $ 92,000 1.37%
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. No cash distributions have been made by
the Partnership to Limited Partners since 1987, and, in total, original
investors in the Partnership have received only $25 of their original $1,000
investment made in 1983.
Operating Budgets of the Partnership. A summary of the fiscal 1996
and 1997 operating budgets and the audited results of operations for fiscal
1996 of the Partnership are set forth in the table below. The budgeted amounts
provided below are figures that were not computed in accordance with generally
accepted accounting principles ("GAAP"). Historically, budgeted operating
results of operations for a particular fiscal year have differed significantly
in certain respects from the audited operating results for that year. In
particular, items that are categorized as capital expenditures for purposes of
preparing the operating budgets are often re-categorized as expenses when the
financial statements are audited and presented in accordance with GAAP.
Therefore, the summary operating budgets presented for fiscal 1997 should not
necessarily be considered as indicative of what the audited operating results
for fiscal 1997 will be. Furthermore, any estimate of the future performance
of a business, such as the Partnership's business, is forward-looking and
based on numerous assumptions, some of which inevitably will prove to be
incorrect. For this reason, it is probable that the Partnership's future
operating results will differ from those projected in the operating budget,
and those differences may be material. Therefore, such information should not
be relied on by Limited Partners.
FISCAL 1996 FISCAL 1996 FISCAL 1997
BUDGETED AUDITED BUDGETED
-------------- -------------- --------------
Total Revenues from Property Operations................. $ 15,728,469 $ 15,747,000 $ 16,422,801
Total Operating Expenses ............................... $ 6,599,897 $ 8,460,000 $ 7,076,817
Net Operating Income.................................... $ 9,128,572 $ 7,287,000 $ 9,345,984
Capital Expenditures.................................... $ 2,231,126 $ 1,130,000 $ 1,616,092
17
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives
to seek to maximize the value of its ownership of Units, which in turn may
result in a conflict for the General Partner in attempting to reconcile the
interests of the Purchaser (which is an affiliate of the General Partner) with
the interests of the other Limited Partners. In addition, the Purchaser (which
is an affiliate of the General Partner) is making the Offer with a view to
making a profit. Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the General Partner) to purchase Units at
a low price and the desire of the Limited Partners to sell their Units at a
high price. The General Partner has indicated in the Schedule 14D-9 that it is
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Units pursuant to the Offer. LIMITED PARTNERS ARE URGED TO
READ THIS OFFER TO PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Voting by the Purchaser. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser (which is an affiliate of the
General Partner) and its managers and designees as proxies with respect to the
Units tendered by such Limited Partners and accepted for payment by the
Purchaser. See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 19,498.34 Units pursuant to the Offer (or
otherwise), IPT (which controls the General Partner, IPLP and the Purchaser)
will own in excess of 50% of the total outstanding Units and, as a result,
will be able to control the outcome of almost all voting decisions with
respect to the Partnership. Even if the Purchaser acquires a lesser number of
Units pursuant to the Offer, however, because IPT already owns (through IPLP)
approximately 28.2% of the outstanding Units it will be able to significantly
influence the outcome of almost all voting decisions with respect to the
Partnership, other than decisions involving a "roll-up" transaction prior to
January 1, 2000. This could (i) prevent non-tendering Limited Partners from
taking action they desire but that IPT opposes and (ii) enable IPT to take
action desired by IPT but opposed by non-tendering Limited Partners. Under the
Limited Partnership Agreement, Limited Partners holding a majority of the
Units are entitled to take action with respect to a variety of matters,
including: removal of a general partner and in certain circumstances election
of new or successor general partners; dissolution of the Partnership; the sale
of all or substantially all of the assets of the Partnership; and most types
of amendments to the Limited Partnership Agreement. However, under the terms
of the Stipulation (as defined in Section 13), the General Partner is required
to prohibit the Partnership from entering into a "roll-up" transaction
involving the General Partner or any of its affiliates prior to January 1,
2000 unless such "roll-up" transaction is approved by Limited Partners holding
at least a majority of the outstanding Units not held by persons affiliated
with the General Partner. When voting on those and other matters, 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. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Units it purchases pursuant to the
Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand to make such contributions. See Section 12. It
is possible, however, that in connection with its future financing activities,
IPT or IPLP may cause or request the Purchaser (which is an affiliate
18
of the General Partner) to pledge the Units as collateral for loans, or
otherwise agree to terms which provide IPT, IPLP and the Purchaser with
incentives to generate substantial near-term cash flow from the Purchaser's
investment in the Units. This could be the case, for example, if a loan has a
"balloon" maturity after a relatively short time or bears a high or increasing
interest rate. In such a situation, the General Partner may experience a
conflict of interest in seeking to reconcile the best interests of the
Partnership with the need of its affiliates for cash flow from the
Partnership's activities.
Transactions with Affiliates. The Partnership, the General Partner
and NPI-AP (which is the property manger for the Partnership) were not
affiliates of Insignia prior to mid-January 1996. Accordingly, this section
only discusses transactions between the Partnership, on the one hand, and
Insignia and its affiliates (including the General Partner and NPI-AP), on the
other hand, which have occurred since mid-January 1996.
Under the Limited Partnership Agreement, the General Partner holds an
interest in the Partnership and is entitled to participate in certain cash
distributions made by the Partnership to its partners. No distributions were
made to the General Partner in respect of its interest in the Partnership in
1996 or to date in 1997. The Partnership paid NPI-AP property management fees
for property management services in the aggregate amounts of $737,000 for the
year ended December 31, 1996 and $369,000 for the six-month period ended June
30, 1997. Insignia and its affiliates do not receive any fees from the
Partnership for the asset management or partnership administration services
they provide, although, pursuant to the Limited Partnership Agreement, the
General Partner and its affiliates are entitled to be reimbursed by the
Partnership for the expenses they incur in connection with providing those
services. The Partnership reimbursed the General Partner and its affiliates
for expenses incurred in connection with asset management and partnership
administration services performed by them for the Partnership in the amounts
of $187,000 for the year ended December 31, 1996 and $78,000 during the first
six months of 1997. During the year ended 1996, the Partnership paid
approximately $7,000 to affiliates of the General Partner for expense
reimbursements in connection with the November 1996 refinancing of Sunrunner
Apartments. On January 19, 1996, the Partnership began insuring its properties
under a master policy through an agency and insurer unaffiliated with the
General Partner. An affiliate of the General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the current year's
master policy. The current agent assumed the financial obligations to the
affiliate of the General Partner who receives payments on these obligations
from the agent. Insignia and the General Partner believe that the aggregate
financial benefit derived by Insignia and its affiliates from the arrangement
described in the three preceding sentences has been immaterial.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of acquiring the Units. 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 Xxx Xxxxxxxx Xxxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its telephone number is (000) 000-0000.
For certain information concerning the managers of the Purchaser (which is an
affiliate of the General Partner), see Schedule II to this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996, primarily for
the purpose of acquiring and owning interests in multifamily residential
properties, including limited and general partner interests in limited
partnerships (including the Partnership) which hold such real estate
properties. IPT has been organized and will operate in a manner that will
qualify it to be taxed as a real estate investment trust ("REIT") under the
Code, and it has elected to be taxed as a REIT beginning with its taxable year
ending December 31, 1996. Substantially all
19
of IPT's operations are conducted through IPLP, which is the operating
partnership of IPT, and of which IPT is presently the sole general partner and
Insignia is presently the sole limited partner.
In forming IPT, Insignia and its affiliates (i) transferred to IPT
shares of stock in corporations comprising or controlling the general partners
of 37 public real estate limited partnerships (including the Partnership) (the
"IPT Partnerships") in exchange for common shares of beneficial interest of
IPT and (ii) transferred to IPLP limited partner interests in the IPT
Partnerships (or equity interests in entities owning limited partner interests
in the IPT Partnerships) in exchange for units of limited partner interest in
IPLP. The IPT Partnerships own, in the aggregate, 184 properties containing
approximately 42,000 residential apartment units and approximately 4.2 million
square feet of commercial space. See Schedule V for a list of the IPT
Partnerships and the percentage of limited partner interests IPLP owns in
each.
IPT does not operate as a self-administered and self-managed REIT,
but rather has engaged, and will for the foreseeable future continue to
engage, Insignia to act as advisor to IPT and IPLP. In such capacity, Insignia
and its affiliates will provide a broad range of services to IPT and IPLP,
including executive advisory, investment advisory, acquisition,
administrative, financial and accounting services, including in connection
with the Offer.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which is an
affiliate of Insignia) and Angeles Mortgage Investment Trust, an
unincorporated California business trust ("AMIT"), entered into a definitive
merger agreement (the "AMIT Merger Agreement"), pursuant to which AMIT is to
be merged with and into IPT, with IPT being the surviving entity, in a stock
for stock transaction (the "AMIT Merger"). XXXX is a public company whose
Class A shares trade on the American Stock Exchange under the symbol ANM.
Insignia and its affiliates currently own 96,800 (or approximately 3.7%) of
the 2,617,000 outstanding AMIT Class A shares and all of the 1,675,113
outstanding AMIT Class B shares. If the AMIT Merger is consummated, IPT will
become a publicly traded company (IPT presently intends to apply for listing
of its shares on the New York Stock Exchange), and it is anticipated that
Insignia and its affiliates will own approximately 58% of post-merger IPT, the
former AMIT shareholders (other than Insignia and its affiliates) will own
approximately 18% of post-merger IPT, and the current unaffiliated
shareholders of IPT will own the remaining 24% of post-merger IPT.
The XXXX Xxxxxx is expected to be completed sometime in the fourth
quarter of 1997. Consummation of the AMIT Merger is subject to several
conditions, including approval of the AMIT Merger Agreement and the AMIT
Merger by the respective shareholders of IPT and XXXX and the receipt by AMIT
of a fairness opinion from its financial advisor to the effect that the AMIT
Xxxxxx is fair to AMIT's shareholders from a financial point of view.
Accordingly, there can be no assurance as to when the AMIT Merger will occur,
or that it will occur at all.
IPT's principal executive offices are located at Xxx Xxxxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its telephone number is
(000) 000-0000. For certain information concerning the trustees and executive
officers of IPT, see Schedule III to this Offer to Purchase. IPLP does not
have any officers or employees.
Set forth below is certain unaudited consolidated financial
information with respect to IPT and IPLP.
20
INSIGNIA PROPERTIES TRUST
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except share and unit data)
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
--------------- ------------
(unaudited) (unaudited)
Statements of Operations Data:
Revenues............................... $ 6,715 $ 7,683
Income Before Extraordinary Item....... $ 1,248 $ 1,535
Net Income............................. $ 1,248 $ 403
Supplemental Data:
Funds From Operations(1)............... $ 8,718 $ 6,691
IPT Common Shares Outstanding.......... 15,501,487 11,168,036
IPLP Units Outstanding................. 8,399,499 8,399,499
--------- ---------
IPT Common Shares Equivalents.......... 23,900,986 19,567,535
========== ==========
Balance Sheets Data:
Cash................................... $ 35,520 $ 4,928
Investments in IPT Partnerships(2)..... $ 124,951 $ 118,741
Long-Term Debt......................... $ 19,950 $ 19,730
Stockholders' Equity(3)................ $ 163,466 $ 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) Represents IPT's investment in 25 of the 37 IPT Partnerships which IPT
accounts for using the equity method. Of the remaining 12 IPT
Partnerships, IPT accounts for 11 using the cost method and one using the
consolidation method.
(3) Includes Insignia's investments in predecessor entities.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of
commercial properties. Insignia's real estate services include property
management, providing all of the day-to-day services necessary to operate a
property, whether residential or commercial; asset management, including
long-term financial planning, monitoring and implementing capital improvement
plans, and development and execution of refinancings and dispositions; real
estate leasing and brokerage; maintenance and construction services; marketing
and advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 2,600 properties, which include approximately 270,000
residential units (including cooperative and condominium units), and in excess
of 147 million square feet of retail, commercial and industrial space, located
in over 500 cities in 48 states. Insignia currently provides partnership
administration services to approximately 900 limited partnerships having
approximately 400,000 limited partners. Insignia is a public company whose
stock is traded on the New York Stock Exchange under the symbol IFS.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Certain information,
as of particular dates, concerning Insignia's business, principal properties,
capital structure, material pending legal proceedings, operating results,
financial condition, directors and officers (including their remuneration and
stock options granted to them), the principal holders of Insignia's
securities, any material interests of such persons in transactions with
Insignia and certain other matters is required to be disclosed in proxy
statements and annual reports distributed to Insignia's shareholders and filed
with the Commission. Such reports, proxy statements and other information may
be inspected
21
and copied at the Commission's public reference facilities and should also be
available for inspection in the same manner as set forth with respect to the
Partnership in Section 9.
Insignia's principal executive offices are located at Xxx Xxxxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its telephone number is
(000) 000-0000. For certain information concerning the directors and executive
officers of Insignia, see Schedule IV to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1996, 1995 and 1994 and the six-month periods ended June
30, 1997 and 1996. More comprehensive financial and other information is
included in Insignia's Annual Report on Form 10-K for the year ended December
31, 1996 (including management's discussion and analysis of financial
condition and results of operations) and in other reports and documents filed
by Insignia with the Commission. The financial information set forth below is
qualified in its entirety by reference to such reports and documents filed
with the Commission and the financial statements and related notes contained
therein. These reports and other documents may be examined and copies thereof
may be obtained in the manner set forth above.
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------------- -------------------------------------
1997 1996 1996 1995 1994
----------- ------------ ------------ ------------ ----------
(unaudited)
Statements of Operations Data:
Total Revenues.................................. $ 154,527 $ 83,319 $ 227,074 $ 123,032 $ 75,453
Income Before Taxes and Extraordinary Item...... $ 7,630 $ 7,690 $ 14,946 $ 10,093 $ 12,101
Net Income...................................... $ 4,578 $ 4,768 $ 8,564 $ 5,806 $ 7,261
Earnings Per Share.............................. $ 0.14 $ 0.15 $ 0.27 $ 0.20 $ 0.35
AS OF AS OF
JUNE 30, DECEMBER 31,
------------------------- -------------------------------------
1997 1996 1996 1995 1994
----------- ------------ ------------ ------------ ----------
(unaudited)
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 77,083 $ 57,366 $ 54,614 $ 49,846 $ 36,596
Receivables..................................... $ 58,536 $ 19,101 $ 46,040 $ 26,445 $ 13,572
Total Assets................................ $ 530,224 $ 473,720 $ 492,402 $ 245,409 $ 174,272
Accounts Payable................................ $ 6,965 $ 2,491 $ 1,711 $ 1,497 $ 3,478
Commissions Payable............................. $ 26,937 -- $ 18,736 $ 602 --
Accrued and Sundry Liabilities.................. $ 37,725 $ 27,158 $ 40,741 $ 25,619 $ 18,790
Long-Term Debt.................................. $ 58,674 $ 141,388 $ 69,140 $ 42,996 $ 73,198
Total Liabilities........................... $ 130,301 $ 258,622 $ 130,328 $ 70,714 $ 95,466
Redeemable Convertible Preferred Stock.......... -- -- -- $ 15,000 --
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 143,978 -- $ 144,169 -- --
Minority Interest of Consolidated Subsidiaries.. $ 31,535 $ 2,690 -- $ 2,682 --
Shareholders' Equity........................ $ 224,410 $ 212,408 $ 217,905 $ 157,013 $ 78,806
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 II, III or
IV hereto, or any affiliate of the foregoing, (i) beneficially owns or has a
right to acquire any Units, (ii) has effected any transaction in the Units in
the last 60 days, or (iii) has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning the transfer or voting thereof,
joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss or the giving or withholding of
22
proxies. Xxxxxx X. Xxxxxx, who is the Chairman of the Board, Chief Executive
Officer and President of Insignia and a trustee of IPT, beneficially owns
approximately 28% of Insignia's outstanding common stock and, as a result, may
be deemed to beneficially own the Units owned by IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $4,825,000 will be required to
purchase 27,000 Units, if tendered, and to pay related fees and expenses. The
Purchaser (which is an affiliate of the General Partner) expects to obtain all
of those funds from IPLP, which in turn intends to use its cash on hand.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation with the General Partner and NPI-AP. The General Partner
is organized as a California general partnership, the general partners of
which are: Fox Capital Management Corporation, a California corporation
("FCMC"); Fox Realty Investors, a California general partnership ("FRI"); and
Fox Partners 83, a California general partnership. FCMC is the managing
general partner of the General Partner. The managing general partner of FRI is
NPI Equity Investments II, Inc. ("NPI Equity"), which (prior to December 1996)
was a wholly-owned subsidiary of National Property Investors, Inc. ("NPI"). In
January 1996, IFGP Corporation, which is a wholly-owned subsidiary of
Insignia, acquired all of the outstanding stock of NPI (and thus all of the
outstanding stock of NPI Equity and the managing general partner interest in
FRI). In June 1996, Insignia Properties Corporation ("IPC"), which at the time
was a wholly-owned subsidiary of Insignia, acquired all of the outstanding
stock of FCMC. In December 1996, as part of the formation of IPT, NPI
contributed all of the outstanding stock of NPI Equity to IPT and IPC was
merged with and into IPT. As a result of the foregoing transactions, each of
FCMC and NPI Equity is now a wholly-owned subsidiary of IPT, and IPT controls
the General Partner. Fox Partners 83 is not affiliated with the Purchaser, IPT
or Insignia. NPI-AP, which is the property manager for the Partnership's
properties, is currently an indirect, wholly-owned subsidiary of Insignia.
Insignia acquired NPI-AP in January 1996 in connection with the foregoing
transactions.
Previous Tender Offers. Between October 1994 and June 1995, XxXxxxxx
Ventures I, L.P. ("XxXxxxxx") acquired 24,812 (or approximately 27.8%) of the
outstanding Units, at a purchase price of $65.70 per Unit, pursuant to a
series of tender offers (the "XxXxxxxx Tender Offers"). At the time, XxXxxxxx
was affiliated with the General Partner but was not an affiliate of the
Purchaser, IPT or Insignia. As a result of litigation instituted in connection
with the XxXxxxxx Tender Offers, in March 1995 the General Partner (and
certain of its affiliates at the time) entered into an Amended Stipulation of
Settlement (the "Stipulation") which, among other things, (i) requires the
General Partner to prohibit the Partnership from entering into a "roll-up"
transaction involving the General Partner or any of its affiliates prior to
January 1, 2000 unless such "roll-up" transaction is approved by Limited
Partners holding at least a majority of the outstanding Units owned by persons
who are unaffiliated with the General Partner, and (ii) prohibits XxXxxxxx and
its affiliates from initiating or participating in any tender offer for Units
for a period of 24 months following the completion of the XxXxxxxx Tender
Offers (which period has now expired). In January 1996, in connection with the
transactions described in the preceding paragraph, Insignia NPI L.L.C.
("Insignia NPI"), which at the time was a wholly-owned subsidiary of Insignia,
acquired from XxXxxxxx all of the Units it acquired pursuant to the XxXxxxxx
Tender Offers. In December 1996, in connection with the formation of IPT,
Insignia NPI was merged with and into IPLP. As a result, IPLP now owns all of
those Units.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and its other affiliates, including among other things:
(i) the Limited Partnership Agreement, as amended to date; (ii) the
Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1996 and the Partnership's Quarterly Report on Form 10-QSB for the period
ended June 30, 1997; (iii) unaudited results of operations of the
Partnership's properties for the period since the beginning of the
Partnership's current fiscal year; (iv) the operating budgets prepared by
NPI-AP with respect to the Partnership's properties for the year ending
December 31, 1997; (v) independent appraisals of certain of the Partnership's
properties; and (vi) other information obtained by NPI-AP, Insignia and other
affiliates in their capacities as providers of property management, asset
management and partnership administration services to the Partnership.
23
Based on that information, the Purchaser (which is an affiliate of the General
Partner) considered several factors, as discussed below.
Trading History of Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the General Partner, from July 1, 1995
to June 30, 1997 an aggregate of 1,139 Units (representing less than 1.3% of
the total outstanding Units) were transferred (excluding the Units acquired by
Insignia from XxXxxxxx in January 1996 and the transfers to IPLP in December
1996 in connection with the formation of IPT). Set forth in the table below
are the high and low sales prices of Units for the quarterly periods from July
1, 1995 to June 30, 1997, as reported by the General Partner and by The
Partnership Spectrum, which is an independent, third-party source. The General
Partner did not begin requesting price-related information in connection with
processing transfers of Units until January 1997. Accordingly, price-related
information for periods prior to January 1996 is not presented under the
column captioned "As Reported by the General Partner" in the table below. The
gross sales prices reported by The Partnership Spectrum do not necessarily
reflect the net sales proceeds received by sellers of Units, which typically
are reduced by commissions and other secondary market transaction costs to
amounts less than the reported prices; thus the Purchaser does not know
whether the information compiled by The Partnership Spectrum is accurate or
complete. The transfer paperwork submitted to the General Partner often does
not include the requested price information or contains conflicting
information as to the actual sales price; accordingly, Limited Partners should
not rely upon this information as being completely accurate.
CENTURY PROPERTIES FUND XIX
REPORTED SALES PRICES OF PARTNERSHIP UNITS
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(A) THE PARTNERSHIP SPECTRUM(B)
---------------------------- -----------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
------------ ----------- ------------ -----------
Fiscal Year Ended December 31, 1997:
Second Quarter.................................... $137 $168 $110 $160
First Quarter .................................... 57 108 92 164
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... n/a n/a 110 118
Third Quarter..................................... n/a n/a 76 102
Second Quarter.................................... n/a n/a 57 73
First Quarter..................................... n/a n/a 50 65
Fiscal Year Ended December 31, 1995:
Fourth Quarter.................................... n/a n/a 60 60
Third Quarter..................................... n/a n/a (c) (c)
(a) Although the General Partner requests and records information on the
prices at which Units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The General Partner processes transfers of Units only 12
times per year - on the first day of each month. The prices in the table
are based solely on information provided to the General Partner by
sellers and buyers of Units transferred in sale transactions (i.e.,
excluding transactions believed to result from the death of a Limited
Partner, rollover to an IRA account, establishment of a trust, trustee to
trustee transfers, termination of a benefit plan, distributions from a
qualified or non-qualified plan, uniform gifts, abandonment of Units or
similar 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 Chicago Partnership Board, Inc., which publishes sell
offers by holders of Units) are the only
24
means available to a Limited Partner to liquidate an investment in Units
(other than the Offer) because the Units are not listed or traded on any
exchange or quoted on NASDAQ.
Appraisals. Certain of the Partnership's properties have been
appraised in the past several years by independent, third party appraisers
(either Xxxxxxx Tener Real Estate Services ("KTR") or Xxxxxx X. Xxxxx &
Associates, Inc. ("Blake")) in connection with refinancings of those
properties. 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 most recent appraisal reports for certain of the Partnership's properties
which have been appraised within the past three years are set forth in the
table below, and copies of the summaries of those appraisals have been filed
as exhibits to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed
with the Commission.
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL APPRAISER
------------------------------- ---------- --------- ---------
Sunrunner Apartments $ 5,400,000 04/15/96 Xxxxx
XxXxxxxx Place Apartments $11,500,000 07/01/97 KTR
Xxxxx Xxxxx Apartments $ 8,500,000 11/02/95 KTR
IPT Formation Values. In connection with the formation of IPT,
Insignia prepared estimates of the values of the Partnership's properties and
of a Unit as of December 31, 1996 for purposes of determining the number of
units of limited partnership interest in IPLP it would receive in exchange for
the Units contributed to IPLP by Insignia and its affiliates. For this
purpose, Insignia estimated the aggregate value of the Partnership's
properties to be $85,484,882 and the value of a Unit to be $288. This
aggregate property value estimate differs from the Gross Real Estate Value
estimate described below by $839,799 (or 1.0%) less than the Gross Real Estate
Value Estimate described below, principally due to changes in the operating
performances of the properties between December 1996 and June 1997; and this
Unit value estimate is $25.65 (or 9.8%) greater than the Estimated Liquidation
Value of a Unit described below, principally due to two factors: (i) changes
in the Partnership's net current assets between December 1996 and June 1997,
and (ii) this was an estimate of the "net asset value" of a Unit and not the
"liquidation value" of a Unit and, therefore, Insignia did not deduct a 4%
reserve to account for the costs associated with liquidating the Partnership's
properties as described below.
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties, the Purchaser
utilized the capitalization of income approach. The estimate of the gross real
estate value of the Partnership's properties prepared by the Purchaser does
not purport to be an estimate of the aggregate fair market value of the Units
themselves, nor should it be viewed as such by Limited Partners. Neither the
Purchaser nor any of its affiliates prepared any estimates of the values of
the Partnership's properties based upon any other valuation method.
The following is a description of the methodology employed by the
Purchaser in preparing such estimates (as used below, "net operating income"
is calculated before depreciation, amortization, debt service payments and
certain capital expenditure items):
WOOD LAKE APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($963,576) generated by the property for the six
months ended June 30, 1997 (comprised of $931,519 of gross rental income and
$32,057 of other income), and then deducted from this amount the total
operating expenses of the property for the first six months of 1997
($402,154), resulting in the Purchaser's estimate of net operating income for
the first six months of 1997 ($561,422). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,122,844, and
then reduced that annualized net operating income amount by $250 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third
25
party purchaser in underwriting the operating expenses, including normal
replacement reserves, of the property for valuation purposes. Finally, the
Purchaser capitalized its estimated adjusted net operating income amount
($1,067,844) at a 9.25% capitalization rate, resulting in an estimated gross
property value of $11,544,259.
GREENSPOINT APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($1,256,583) generated by the property for the
six months ended June 30, 1997 (comprised of $1,187,507 of gross rental income
and $69,076 of other income), and then deducted from this amount the total
operating expenses of the property for the first six months of 1997
($491,764), resulting in the Purchaser's estimate of net operating income for
the first six months of 1997 ($764,819). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,529,638, and
then reduced that amount by $400 per apartment unit, representing the
Purchaser's estimate of the adjustment that would be imputed by a third party
purchaser in underwriting the operating expenses, including normal replacement
reserves, of the property for valuation purposes. Finally, the Purchaser
capitalized its estimated adjusted net operating income amount ($1,395,238) at
a 9.25% capitalization rate, resulting in an estimated gross property value of
$15,083,654.
SANDSPOINT APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($1,350,425) generated by the property for the
six months ended June 30, 1997 (comprised of $1,287,397 of gross rental income
and $63,028 of other income), and then deducted from this amount the total
operating expenses of the property for the first six months of 1997
($623,167), resulting in the Purchaser's estimate of net operating income for
the first six months of 1997 ($727,258). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,454,516, and
then reduced that amount by $200 per apartment unit, representing the
Purchaser's estimate of the adjustment that would be imputed by a third party
purchaser in underwriting the operating expenses, including normal replacement
reserves, of the property for valuation purposes. Finally, the Purchaser
capitalized its estimated adjusted net operating income amount ($1,368,116) at
a 9.25% capitalization rate, resulting in an estimated gross property value of
$14,790,443.
WOOD RIDGE APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($1,121,118) generated by the property for the
six months ended June 30, 1997 (comprised of $1,084,558 of gross rental income
and $36,560 of other income), and then deducted from this amount the total
operating expenses of the property for the first six months of 1997
($508,238), resulting in the Purchaser's estimate of net operating income for
the first six months of 1997 ($612,880). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,225,760, and
then reduced that annualized net operating income amount by $100 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($1,197,760) at a 9.25% capitalization rate, resulting in an estimated
gross property value of $12,948,757.
PLANTATION CROSSING. In estimating the value of this property, the
Purchaser reviewed the income ($652,883) generated by the property for the six
months ended June 30, 1997 (comprised of $635,570 of gross rental income and
$17,263 of other income), and then deducted from this amount the total
operating expenses of the property for the first six months of 1997
($325,081), resulting in the Purchaser's estimate of net operating income for
the first six months of 1997 ($327,752). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $655,504, and
then increased that annualized net operating income amount by $100 per
apartment unit, representing the Purchaser's estimate of the adjustment that
would be imputed by a third party purchaser in underwriting the operating
expenses, including normal replacement reserves, of the property for valuation
purposes. Finally, the Purchaser capitalized its estimated adjusted net
operating income amount ($673,504) at a 9.5% capitalization rate, resulting in
an estimated gross property value of $7,089,516.
SUNRUNNER APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($602,847) generated by the property for the six
months ended June 30, 1997 (comprised of $839,799 of gross rental income and
$23,008 of other income), and then deducted from this amount the total
operating expenses of the property for the first six months of 1997
($340,128), resulting in the Purchaser's estimate of net operating income for
the first six months of 1997 ($262,719). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $525,438, and
then reduced that annualized net operating income amount by $100 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third
26
party purchaser in underwriting the operating expenses, including normal
replacement reserves, of the property for valuation purposes. Finally, the
Purchaser capitalized its estimated adjusted net operating income amount
($505,438) at a 9.5% capitalization rate, resulting in an estimated gross
property value of $5,320,400.
XXXXXXXX PLACE APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($1,205,020) generated by the property for
the six months ended June 30, 1997 (comprised of $1,149,753 of gross rental
income and $55,267 of other income), and then deducted from this amount the
total operating expenses of the property for the first six months of 1997
($512,192), resulting in the Purchaser's estimate of net operating income for
the first six months of 1997 ($692,828). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,385,656, and
then reduced that annualized net operating income amount by $600 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($1,144,456) at a 10.0% capitalization rate, resulting in an estimated
gross property value of $11,444,560.
XXXXX XXXXX APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($700,212) generated by the property for the six
months ended June 30, 1997 (comprised of $672,738 of gross rental income and
$27,474 of other income), and then deducted from this amount the total
operating expenses of the property for the first six months of 1997
($336,844), resulting in the Purchaser's estimate of net operating income for
the first six months of 1997 ($363,368). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $726,736, and
then increased that annualized net operating income amount by $100 per
apartment unit, representing the Purchaser's estimate of the adjustment that
would be imputed by a third party purchaser in underwriting the operating
expenses, including normal replacement reserves, of the property for valuation
purposes. Finally, the Purchaser capitalized its estimated adjusted net
operating income amount ($749,536) at a 9.25% capitalization rate, resulting
in an estimated gross property value of $8,103,092.
Based on the individual estimates of the gross values of the
Partnership's properties described above, the Purchaser estimated that the
current aggregate gross real estate value of the Partnership's properties is
$86,324,681 (the "Gross Real Estate Value Estimate"). The property-specific
capitalization rates used by the Purchaser in the valuation estimates
described above were based upon the Purchaser's, IPT's and Insignia's general
knowledge of the revenues and expenses associated with operating multi-family
properties in the markets in which the Partnership's properties are located,
their general knowledge of property values in those markets and their
experience in the real estate market in general.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that this approach represents
a reasonable method of estimating the aggregate gross value of the
Partnership's properties (without taking into account the costs of disposing
of the properties), subject to the substantial uncertainties inherent in any
estimate of value. The use of other assumptions, however, particularly as to
the applicable capitalization rate, could produce substantially different
results. None of the Purchaser, IPT or Insignia solicited any offers or
inquiries from prospective buyers of the Partnership's properties in
connection with preparing the Purchaser's estimates of the fair market values
of those properties, and the actual amounts for which the Partnership's
properties might be sold could be significantly higher or significantly lower
than the Purchaser's estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the debt encumbering the Partnership's properties or the other liabilities of
the Partnership, (ii) cash and other assets held by the Partnership, (iii)
real estate transaction costs that would be incurred on a sale of the
Partnership's properties, such as brokerage commissions and other selling and
closing expenses, (iv) timing considerations or (v) costs associated with
winding up the Partnership. For this reason, the Purchaser considers the Gross
Real Estate Value Estimate to be less meaningful in evaluating the Purchase
Price offered by the Purchaser than its pro forma estimate of the net
liquidation value per Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, which are a relatively illiquid
investment, and is not offering to purchase the Partnership's underlying
assets
27
or assume any of its liabilities. Consequently, the Purchaser does not believe
that the per-Unit amount which might me distributed to Limited Partners
following a future sale of all the Partnership's properties necessarily
reflects the present fair value of a Unit. Conversely, the realizable value of
the Partnership's assets clearly is a relevant factor in determining the price
a prudent purchaser would offer for Units. In considering this factor, the
Purchaser made a pro forma calculation of the amount each Limited Partner
might receive in a theoretical orderly liquidation of the Partnership (which
may not be realistically possible, particularly in the near term, due to real
estate market conditions, the general difficulty of disposing of real estate
in a short period of time, and other general economic factors), based on the
Gross Real Estate Value Estimate described above and the other considerations
described below. The Purchaser based its pro forma liquidation analysis on the
Gross Real Estate Value Estimate (and thus on the Purchaser's estimates of the
values of the Partnership's properties described above), as opposed to the
appraised values of the Partnership's properties or the values estimated in
connection with the formation of IPT (as described above), because the
Purchaser believes that the Gross Real Estate Value Estimate represents the
best estimate, based on currently available information, of the values of the
Partnership's properties.
In estimating the pro forma net liquidation value per Unit, the
Purchaser adjusted its Gross Real Estate Value Estimate of $86,324,681 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses). Specifically, the Purchaser added the amounts of cash,
accounts receivable and escrow deposits shown on the Partnership's unaudited
balance sheet at June 30, 1997 ($4,371,000), and subtracted the mortgage debt
encumbering the Partnership's properties ($61,292,000) and all other
liabilities shown on that balance sheet ($2,047,000). The Purchaser then
deducted from that amount $3,452,987, 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, $23,903,694, represents the
Purchaser's pro forma estimate of the aggregate net liquidation proceeds
(before provision for the costs described in the following sentence) which
could be realized on an orderly liquidation of the Limited Partnership, based
on the assumptions implicit in the calculations described above. The Purchaser
did not, however, deduct any amounts in respect of the legal and other costs
which the Purchaser expects would be incurred in a liquidation, including
costs of negotiating purchase and sale contracts, possibly conducting a
consent solicitation in order to obtain the Limited Partners' approvals for
the sales as may be required by the Limited Partnership Agreement, and winding
up the Partnership, because of the difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser then
deducted 2%, which is the percentage allocable to the General Partner in
respect of its non-subordinated interest in the Partnership, and the remaining
$23,425,620 was then divided by the 89,292 Units reported as outstanding by
the General Partner as of August 1, 1997. The resulting estimated pro forma
liquidation value was $262.35 per Unit (the "Estimated Liquidation Value"),
before provision for the legal and other costs of liquidating the Partnership
described in the last sentence of the preceding paragraph.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Units because
(i) there is no assurance that any such liquidation in fact will occur in the
foreseeable future and (ii) any liquidation in which the estimated fair market
values described above might be realized would take an extended period of time
(at least a year, and quite possibly significantly longer), during which time
the Partnership and its partners would continue to be exposed to the risk of
fluctuations in asset values because of changing market conditions and other
factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Units is substantially less than its estimate of the Estimated Liquidation
Value. Conversely, there is a substantial possibility that the per-Unit value
realized in an orderly liquidation could be greater than the Estimated
Liquidation Value. A reduction in either operating expenses or capital
expenditures from the levels reflected in the property operating statements
for the six months ending June 30, 1997 would result in a higher liquidation
value under the method described above. Similarly, a higher liquidation value
would result if a buyer applied lower capitalization rates (reflecting a
willingness to accept a lower rate of return on its investment) to the
applicable net operating income generated by the Partnership's properties than
the capitalization rates applied by the Purchaser. For example, a 5% increase
or decrease in the value of the
28
Partnership's properties would produce a corresponding increase or decrease in
the Estimated Liquidation Value of approximately $45.48 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. Furthermore, notwithstanding any other term of the Offer and in
addition to the Purchaser's right to withdraw the Offer at any time before the
Expiration Date, the Purchaser (which is an affiliate of the General Partner)
will not be required to accept for payment or pay for any Units not
theretofore accepted for payment or paid for and may terminate or amend the
Offer as to such Units if, at any time on or after the date of the Offer and
before the Expiration Date, any of the following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the
Offer or the acceptance for payment, purchase of or payment for any Units by
the Purchaser (which is an affiliate of the General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units, including without limitation the right
to vote any Units acquired by the Purchaser pursuant to the Offer or otherwise
on all matters properly presented to the Partnership's Limited Partners, (iii)
requires divestiture by the Purchaser of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as a result of the
transactions contemplated by the Offer, or (v) might materially adversely
affect the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Purchaser or the
Partnership;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) any limitation by any governmental
authority on, or other event which might affect, the extension of credit by
lending institutions or result in any imposition of currency controls in the
United States, (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the United
States, (v) a material change in United States or other currency exchange
rates or a suspension of, or imposition of a limitation on, the markets
thereof, or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof;
or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i)
more than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act), or (ii) any person or group that prior to such
date had filed a Statement with the Commission pursuant to Section 13(d) or
(g) of the Exchange Act has increased or proposes to increase the number of
Units beneficially owned by such person or group as disclosed in such
Statement by two percent or more of the outstanding Units.
29
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. 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.
30
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).
IPLP ACQUISITION I LLC
AUGUST 28, 1997
31
SCHEDULE I
TRANSACTIONS IN THE UNITS
EFFECTED BY IPLP WITHIN THE PAST 60 DAYS
Number of Price
DATE Units Purchased Per Unit
---- --------------- ---------
08/12/97 10 $152.00
08/12/97 10 $159.00
S-1
SCHEDULE II
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the managers of the
Purchaser. Each person identified below is employed by Xxxxxxxx and is a
United States citizen. The principal business address of the Purchaser and,
unless otherwise indicated, the business address of each person identified
below, is One Insignia Financial Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has been a Manager of the Purchaser since its inception in
000 Xxxx Xxxxxx August 1997. For additional information regarding Xx. Xxxxx, see Schedule
Suite 3401 III.
New York, NY 10152
Xxxx X. Xxxxx Xxxx X. Xxxxx has been a Manager of the Purchaser since its inception in
August 1997. For additional information regarding Mr. Xxxxx, see Schedules
III and IV.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has been a Manager of the Purchaser since its inception in
August 1997. For additional information regarding Xx. Xxxxxx, see Schedules
III and IV.
S-2
SCHEDULE III
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the trustees and
executive officers of IPT. Each person identified below is employed by
Xxxxxxxx and is a United States citizen. The principal business address of IPT
and, unless otherwise indicated, the business address of each person
identified below, is One Insignia Financial Plaza, Greenville, South Carolina
29602. Trustees are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has served as a Trustee of IPT since December 1996,
and has served as Chairman of the Board of Trustees of IPT since
January 1997. For additional information regarding Xx. Xxxxxx, see
Schedule IV.
Xxxxx X. Xxxxx* Xxxxx X. Xxxxx has served as a Trustee and President of IPT since
its inception in May 1996. For additional information regarding
Xx. Xxxxx, see Schedule IV.
Xxxxx X. Xxxxxxxx* Xxxxx X. Xxxxxxxx has served as a Trustee of IPT since December
102 Woodmont Boulevard 1996. Xx. Xxxxxxxx also served as an Executive Managing
Suite 400 Director of IPT from January 1997 to April 1997. For additional
Nashville, TN 37205 information regarding Xx. Xxxxxxxx, see Schedule IV.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as a Senior Vice President of IPT
000 Xxxx Xxxxxx since August 1997, and served as a Vice President of IPT from
Suite 3401 June 1997 until August 1997. Since April 1997, Xx. Xxxxx'x
New York, NY 10152 principal occupation has been to serve as a Senior Vice President
-- Investment Banking of Insignia. Prior to April 1997, Xx.
Xxxxx'x principal occupation was as an attorney with the law firm
of Xxxxxx & Xxxxx, New York, New York.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as the Controller of IPT since August
1997. Since April 1995, Mr. Xxxxx' principal occupation has been
to serve as an accountant with Insignia. Prior to April 1995, Mr.
Xxxxx' principal occupation was as a senior auditor with the
accounting firm of Ernst & Young LLP.
Xxxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxxx, Xx. has served as a Senior Vice President of
IPT since August 1997, and served as Vice President and Director
of Operations of IPT from December 1996 until August 1997. For
additional information regarding Xx. Xxxxxxx, see Schedule IV.
Xxxx X. Xxxxx Xxxx X. Xxxxx has served as Secretary of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Mr. Xxxxx served as a Vice President IPT from May
1996 until August 1997. For additional information regarding Mr.
Xxxxx, see Schedule IV.
S-3
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has served as Treasurer of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Xx. Xxxxxx served as a Vice President of IPT from
December 1996 until August 1997 and as Chief Financial Officer
of IPT from May 1996 until December 1996. For additional
information regarding Xx. Xxxxxx, see Schedule IV.
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has served as Chief Operating Officer of IPT since
May 1997. Since August 1994, Xx. Xxxxxx'x principal occupation has
been to serve as President of the various corporate general partners
of partnerships controlled by Metropolitan Asset Enhancement, L.P.,
which is an affiliate of Insignia.
S-4
SCHEDULE IV
INFORMATION REGARDING THE
DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Insignia. Unless otherwise indicated, each person
identified below is employed by Insignia and is a United States citizen. The
principal business address of Insignia and, unless otherwise indicated, the
business address of each person identified below, is One Insignia Financial
Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000. Directors are identified by an
asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has been a Director and Chairman, President and
Chief Executive Officer of Insignia since its inception in
January 1991. Xx. Xxxxxx has also been President of Metropolitan
Asset Group, Ltd. ("MAG"), a real estate investment banking firm,
since 1983.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of Insignia since May 1996.
0000 Xxxxx Xxxxxx Xxxxx For more than the past five years, Xx. Xxxxxxx'x principal
Santa Fe, NM 87501 occupation has been as a General Partner of First Security
Company II, L.P., an investment advisory firm.
Xxxxx X. Xxxxxx* Xxxxx X. Xxxxxx has been a Director of Insignia since August 1993. Mr.
000 Xxxx Xxxxxx Xxxxxx is the retired Chairman of the Board and Chief Executive Officer of
New York, NY 10021 Xxxxxxxxx'x Inc., a real estate company. He also serves as a director of Refac
Technology Development Corporation, Noodle Kiddoodle, and Containerways
International Ltd.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of Insignia since August 1993. For
000 Xxxxxxx Xxxxxx more than the past five years, Xx. Xxxxxxx'x principal occupation has been as
New York, NY 10022 Chairman of the Board of Directors and Co-Chief Executive Officer of
Charterhouse Group International, Inc., a privately-owned
investment firm which, among other things, actively engages in
making private equity investments in a broad range of industrial
and service companies located primarily in the United States. Xx.
Xxxxxxx is also a director of American Disposal Services, Inc.,
Designer Holdings Ltd. and Microwave Power Devices, Inc.
Xxxxxx X. Xxxx* Xxxxxx X. Xxxx has been a Director of Insignia since August 1993. Since
000 Xxxx 00xx Xxxxxx February 1996, Xx. Xxxx has been a partner in the law firm of Akin, Gump,
New York, NY 10019 Xxxxxxx, Xxxxx & Xxxx, which represents Insignia and certain of its affiliates
from time to time. From January 1991 to February 1996, Xx. Xxxx was a
partner in the law firm LeBoeuf, Lamb, Xxxxxx & XxxXxx.
Xxxxxxx X. Xxxxxxxx* Xxxxxxx X. Xxxxxxxx has been a Director of Insignia since August
110 East 59th Street 1993. For more than the past five years, Xx. Xxxxxxxx'x principal
New York, NY 10022 occupation has been as a self-employed consultant in the real estate
business, including ownership, management and lending.
S-5
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx Xxxxxx* Xxxx Xxxxxx has been a Director of Insignia since August 1993.
000 X. Xxxx Xxxxxx For more than the past five years, Xx. Xxxxxx'x principal
Greenville, SC 29601 occupation has been to serve as Chairman of the Board and Chief
Executive Officer of RSI Holdings, a company which distributes
outdoor equipment. Xx. Xxxxxx is also a director of Fluor
Corporation, The Liberty Corporation, NationsBank Corporation,
Emergent Group, Inc., Delta Woodside Industries, Inc., Duke Power
Company, and Textile Hall Corporation.
Xxxxx X. Aston Xxxxx X. Aston's principal employment has been with Insignia for
more than the past five years. Xx. Xxxxx currently serves as
Chief Financial Officer of Insignia (since August 1996) and with
the Office of the Chairman (since July 1994).
Xxxxxx X. Xxxxxx Xxxxxx Xxxxxx has been a Senior Vice President -- Human Resources
of Insignia since August 1997. Prior to August 1997, Xx. Xxxxxx'x
principal employment for more than the prior five years was as
Director -- Human Resources of E&Y Xxxxxxx Xxxxxxxxx Real Estate
Group, New York, New York.
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx'x principal employment has been with Insignia for more
000 Xxxxxxxx Xxxxxxxxx than the past five years. Xx. Xxxxxxxx currently serves as an Executive
Suite 400 Managing Director of Insignia (since July 1994) and as President of Insignia
Nashville, TN 37205 Financial Services, a division of Insignia (since July 1994).
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx'x principal employment has been with Insignia for more
000 Xxxx Xxxxxx than the past five years. Xx. Xxxxxxxx currently serves as a Managing
Suite 3401 Director -- Investment Banking of Insignia (since July 1994).
New York, NY 10152
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx has been with the Office of the Chairman of Insignia since
000 Xxxx Xxxxxx July 1996. Prior to July 1996, Xx. Xxxxxx'x principal employment for more
New York, NY 10166 than the prior five years was as a founder and Chairman of Xxxxxx X. Xxxxxx
Company, Incorporated ("ESG"), a commercial property management
and brokerage firm located in New York, New York that was
acquired by Insignia in June 1996.
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx'x principal employment has been with Insignia for more than
the past five years. Xx. Xxxxxxx currently serves as a Senior Vice President of
Insignia (since July 1994) and as Chief Information Officer of
Insignia (since January 1991).
Xxxxx Xxxxxxxx Xxxxx Xxxxxxxx'x principal employment has been with Insignia since January
1993. Xx. Xxxxxxxx currently serves as an Executive Managing Director of
Insignia (since June 1994) and Chief Operating Officer of
Insignia Commercial Group (since January 1997). From January 1987
to January 1993, Xx. Xxxxxxxx'x principal employment was as Chief
Executive Officer of First Resource Realty, Inc., a commercial
property management organization located in Oklahoma that
Insignia acquired in January 1993.
Xxxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxxx, Xx.'s principal employment has been with Insignia for
more than the past five years. Xx. Xxxxxxx currently serves as Managing
Director -- Partnership Administration of Insignia (since January 1994).
S-6
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx Xxxxxxx Xxxx Xxxxxxx has been an Executive Managing Director of Insignia since
909 Third Avenue September 1995 and President of Insignia Residential Group since September
New York, NY 10022 1997. Prior to September 1995, Xx. Xxxxxxx'x principal occupation was to
serve as President and Chief Executive Officer of Xxxxxxx
Company, Inc., a residential property management firm located in
New York, New York which Insignia acquired in September 1995.
Xxxx X. Xxxxx Xxxx X. Xxxxx has been General Counsel of Insignia since June 1994 and
Secretary since July 1994. From May 1993 until June 1994, Mr. Xxxxx'
principal employment was as Assistant General Counsel and Vice
President of Ocwen Financial Corporation, a thrift holding
company located in West Palm Beach, Florida. From October 1991
until April 1993, Mr. Xxxxx' principal employment was as Senior
Attorney of Banc One Corporation, a bank holding company in
Columbus, Ohio.
Xxxxxx Xxxx Xxxxxx Xxxx has been a Senior Vice President -- Finance of Insignia since
January 1997 and Controller of Insignia since June 1994. Prior to
June 1994, Xx. Xxxx was Senior Vice President and Controller of
The First Savings Bank located in Greenville, South Carolina.
Xxxxxxx X. Xxxxxxxxxxxxxx Xxxxxxx X. Xxxxxxxxxxxxxx'x principal employment has been with Insignia for
more than the past five years. Xx. Xxxxxxxxxxxxxx currently
serves as a Senior Vice President -- Investment Banking of
Insignia (since April 1997).
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx'x principal employment has been with Insignia for more
than the past five years. Xx. Xxxxxx currently serves as Chief
Operating Officer of Insignia Residential Group (since January
1997).
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has been an Executive Managing Director of Insignia since
000 Xxxx Xxxxxx July 1996 and President of Insignia Commercial Group since January 1997.
New York, NY 10166 From February 1992 until July 1996, Xx. Xxxxxx'x principal employment was
as President of ESG.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx'x principal employment has been with Insignia for more than the
past five years. Xx. Xxxxxx currently serves as Chief Operating Officer (since
August 1996) and Treasurer (since January 1992) of Insignia.
S-7
SCHEDULE V
IPT PARTNERSHIPS
% OF LIMITED PARTNER
PARTNERSHIP NAME INTERESTS OWNED BY IPLP(a)
---------------- --------------------------
Consolidated Capital Growth Fund 39.2%
Consolidated Capital Institutional Properties 25.1%
Consolidated Capital Properties/2 1.7%
Consolidated Capital Institutional Properties/3 11.1%
Consolidated Capital Properties III 25.0%
Consolidated Capital Properties IV 19.3%
Consolidated Capital Properties V (b)
Consolidated Capital Properties VI 22.9%
Shelter Properties I Limited Partnership 39.2%
Shelter Properties II Limited Partnership 33.1%
Shelter Properties III Limited Partnership 33.7%
Shelter Properties IV Limited Partnership(c) (b)
Shelter Properties V Limited Partnership 38.1%
Shelter Properties VI Limited Partnership 27.1%
Shelter Properties VII Limited Partnership 1.8%
National Property Investors III 44.6%
National Property Investors 4 54.1%
National Property Investors 5 45.0%
National Property Investors 6 43.6%
National Property Investors 7 41.9%
National Property Investors 8 37.0%
Century Properties Fund XIV 41.3%
Century Properties Fund XV 39.6%
Century Properties Fund XVI 36.6%
Century Properties Fund XVII 34.6%
Century Properties Fund XVIII 29.0%
Century Properties Fund XIX 28.2%
Century Properties Fund XX (b)
Century Properties Growth Fund XXII 20.8%
Century Pension Income Fund XXIII (b)
Century Pension Income Fund XXIV (b)
Johnstown/Consolidated Income Partners 9.1%
Johnstown/Consolidated Income Partners/2 (b)
Davidson Growth Plus, L.P. 8.5%
Multi-Benefit Realty Fund 87-1 (b)
U.S. Realty Partners, L.P. (b)
Fox Strategic Housing Income Partners (b)
-----------------------------
(a) As of August 15, 1997.
(b) Indicates that less than 1% of the outstanding limited partner interests
are owned by IPLP.
(c) IPLP holds an option to acquire approximately 31.0% of the limited partner
interests in Shelter Properties IV from Insignia and its affiliates, in
exchange for additional units of limited partner interest in IPLP. This
option is exercisable by IPT on or before December 31, 1997, and IPT
presently expects that it will exercise the option before it expires.
S-8
Manually signed 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 Hand/Overnight Delivery:
Wall Street Station Receive Window
P.O. Box 0000 00 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 Xxx Xxxx, Xxx Xxxx 00000
Telephone:
(000) 000-0000
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)
