Offer to Purchase for Cash
Up to 10,000 Units of Limited Partnership Interest
in
DAVIDSON GROWTH PLUS, L.P.,
a Delaware limited partnership
for
$400 Net Per Unit
by
XXXXXX RIVER PROPERTIES, L.L.C.
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THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK TIME, ON SEPTEMBER 24, 1998, UNLESS THE OFFER IS EXTENDED.
-------------------------------------------------------------------------------
IMPORTANT
Xxxxxx River Properties, L.L.C., a Delaware limited liability company
(the "Purchaser"), is offering to purchase up to 10,000 of the outstanding
units of limited partnership interest ("Units") in Davidson Growth Plus, L.P.,
a Delaware limited partnership (the "Partnership"), at a purchase price of $400
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 Davidson Growth
Plus GP Corporation, which is the managing general partner of the Partnership
(the "Managing General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the Managing General Partner are both
affiliates of and controlled by Insignia Properties Trust
("IPT"), which is controlled by Insignia Financial Group,
Inc. ("Insignia"). IPT, through its operating partnership
Insignia Properties, L.P. ("IPLP"), currently owns 2,482.83
Units (including 2,049 Units, which were originally acquired
by an affiliate of the Managing General Partner and Insignia,
at a purchase price of $240 per Unit, pursuant to a tender
offer commenced in December 1995).
o The net asset value per Unit most recently estimated by an
affiliate of the Managing General Partner was $578 as of June
30, 1998, and the net liquidation value per Unit (the
"Estimated Liquidation Value") estimated by the Purchaser
(which is an affiliate of the Managing General Partner) in
connection with the Offer is $555.27. The Purchaser does not
believe, however, that either the net asset value estimate by
the Managing General Partner's affiliate or the Estimated
Liquidation Value represents a fair estimate of the market
value of a Unit, primarily due to the fact that such
estimates do not take into account timing considerations,
market uncertainties and legal and other expenses that would
be incurred in connection with a liquidation of the
Partnership. See Section 13. Accordingly, the Purchaser does
not believe that such estimates should be viewed as
representative of the amount a Limited Partner can
realistically expect to obtain on a sale of a Unit in the
near term.
o The Purchaser will have the right to vote all Units acquired
pursuant to the Offer. Accordingly, if the Purchaser (which
is an affiliate of the Managing General Partner) is
successful in acquiring a significant number of Units, it
will be able to significantly influence all voting decisions
with respect to the Partnership, including decisions
regarding liquidation, amendments to the Limited Partnership
Agreement, removal and replacement of the Managing General
Partner and the individual general partner and mergers,
consolidations and other extraordinary transactions.
o The Purchaser (which is an affiliate of the Managing 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 Managing General
Partner) to purchase Units at a low price and the desire of
the Limited Partners to sell their Units at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Units should complete and sign
the Assignment of Partnership Interest in accordance with the Instructions to
the Assignment of Partnership Interest and mail or deliver the signed
Assignment of Partnership Interest to the Depositary. A Limited Partner may
tender any or all of the Units owned by that Limited Partner; provided,
however, that because of restrictions in the Partnership's Limited Partnership
Agreement, a partial tender of Units must be for a minimum of five Units (or,
in the case of Limited Partners who hold Units in an Individual Retirement
Account or Xxxxx Plan, at least two Units). Tenders of fractional Units will
not be permitted, except by a Limited Partner who is tendering all of the Units
owned by that Limited Partner.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at the address and telephone numbers set forth below and
on the back cover of this Offer to Purchase. No soliciting dealer fees or other
payments to brokers for tenders are being paid by the Purchaser (which is an
affiliate of the Managing General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(000) 000-0000
August 27, 1998
TABLE OF CONTENTS
PAGE
INTRODUCTION.................................................................................................... 1
The Purchaser; Affiliation with the Managing General Partner................................................ 1
Some Factors to Be Considered by Limited Partners........................................................... 2
Reasons for and Effects of the Offer........................................................................ 4
Certain Tax Considerations.................................................................................. 4
Originally Anticipated Term of the Partnership; General Policy Regarding Sales
and Refinancings of Partnership Properties; Alternatives........................................... 4
Conditions.................................................................................................. 4
Distributions............................................................................................... 4
Outstanding Units........................................................................................... 5
THE OFFER....................................................................................................... 6
Section 1. Terms of the Offer; Expiration Date; Proration.................................................. 6
Section 2. Acceptance for Payment and Payment for Units.................................................... 7
Section 3. Procedure for Tendering Units................................................................... 7
Valid Tender............................................................................................ 7
Signature Requirements.................................................................................. 8
Delivery of Assignment of Partnership Interest.......................................................... 8
Appointment as Proxy; Power of Attorney................................................................. 8
Assignment of Interest in Future Distributions.......................................................... 9
Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation
to Give Notice of Defects.......................................................................... 9
Backup Federal Income Tax Withholding................................................................... 9
FIRPTA Withholding...................................................................................... 9
Binding Obligation...................................................................................... 9
Section 4. Withdrawal Rights............................................................................... 9
Section 5. Extension of Tender Period; Termination; Amendment.............................................. 10
Section 6. Certain Federal Income Tax Matters.............................................................. 10
General................................................................................................. 10
Gain or Loss Generally.................................................................................. 11
Unrealized Receivables and Certain Inventory............................................................ 11
Passive Activity Loss Limitation........................................................................ 12
Partnership Termination................................................................................. 12
Backup Withholding and FIRPTA Withholding............................................................... 12
Section 7. Effects of the Offer............................................................................ 13
Limitations on Resales.................................................................................. 13
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act.......................... 13
Control of Limited Partner Voting Decisions by Purchaser; Effect of Relationship
with Managing General Partner...................................................................... 13
Section 8. Future Plans of Insignia, IPT and the Purchaser................................................. 14
Section 9. Certain Information Concerning the Partnership.................................................. 15
General................................................................................................. 15
Originally Anticipated Term of Partnership; Alternatives................................................ 15
General Policy Regarding Sales and Refinancings of Partnership Properties............................... 15
Selected Financial and Property-Related Data............................................................ 15
Cash Distributions History.............................................................................. 18
Operating Budgets of the Partnership.................................................................... 18
Section 10. Conflicts of Interest and Transactions with Affiliates......................................... 18
Conflicts of Interest with Respect to the Offer......................................................... 18
Voting by the Purchaser................................................................................. 19
i
Financing Arrangements.................................................................................. 19
Transactions with Affiliates............................................................................ 19
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia........................... 20
The Purchaser........................................................................................... 20
IPT and IPLP............................................................................................ 20
Insignia................................................................................................ 21
Section 12. Source of Funds................................................................................ 23
Section 13. Background of the Offer........................................................................ 24
Affiliation With the Managing General Partner........................................................... 24
Previous Tender Offer................................................................................... 24
Determination of Purchase Price......................................................................... 24
Litigation.............................................................................................. 29
Section 14. Conditions of the Offer........................................................................ 30
Section 15. Certain Legal Matters.......................................................................... 31
General................................................................................................. 31
Antitrust............................................................................................... 31
Margin Requirements..................................................................................... 31
Section 16. Fees and Expenses.............................................................................. 31
Section 17. Miscellaneous.................................................................................. 31
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
DAVIDSON GROWTH PLUS, L.P.
INTRODUCTION
Xxxxxx River Properties, L.L.C. (the "Purchaser"), which is a Delaware
limited liability company and an affiliate of the Managing General Partner (as
defined below), hereby offers to purchase up to 10,000 of the outstanding units
of limited partnership interest ("Units"), representing approximately 35% of
the Units outstanding, in Davidson Growth Plus, L.P., a Delaware limited
partnership (the "Partnership"), at a purchase price of $400 per Unit (the
"Purchase Price"), net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Assignment of Partnership Interest (which, together with any
supplements or amendments, collectively constitute the "Offer"). The Offer is
not conditioned on any aggregate minimum number of Units being tendered. A
Limited Partner may tender any or all of the Units owned by that Limited
Partner; provided, however, that because of restrictions in the Partnership's
Limited Partnership Agreement (the "Limited Partnership Agreement"), a partial
tender of Units must be for a minimum of five Units (or, in the case of Limited
Partners who hold Units in an Individual Retirement Account ("IRA") or Xxxxx
Plan, at least two Units). Accordingly, any Limited Partner that owns five or
fewer Units (or, in the case of Limited Partners who hold Units in an IRA or
Xxxxx Plan, two Units), must tender all or none of its Units. Tenders of
fractional Units will not be permitted, except by a Limited Partner who is
tendering all of the Units owned by that Limited Partner. The Purchaser (which
is an affiliate of the Managing General Partner) will pay all charges and
expenses of Beacon Hill Partners, Inc., who will serve as the Purchaser's
information agent for the Offer (the "Information Agent"), and Xxxxxx Trust
Company of New York, who will act as depositary for the Offer (the
"Depositary").
The Purchaser; Affiliation with the Managing General Partner. Davidson
Growth Plus GP Corporation, which is the managing general partner of the
Partnership (the "Managing General Partner"), is a direct, wholly-owned
subsidiary of Insignia Properties Trust, a Maryland real estate investment
trust ("IPT"). The other general partner of the Partnership, Xxxxx X. Xxxx, is
prohibited by the Limited Partnership Agreement from participating in the
activities of the Partnership. The Purchaser is a recently formed, wholly-owned
subsidiary of Insignia Properties, L.P., a Delaware limited partnership
("IPLP"), which is the operating partnership of IPT. IPT is the sole general
partner of IPLP (owning approximately 66% of the total equity interests in
IPLP), and Insignia Financial Group, Inc., a Delaware corporation ("Insignia"),
is the sole limited partner of IPLP (owning approximately 34% of the total
equity interests in IPLP). Insignia and its affiliates also own approximately
68% of the outstanding common shares of IPT. For more than the past three
years, Insignia Residential Group, L.P. ("IRG"), which is an affiliate of
Insignia and the Purchaser, has provided property management services to the
Partnership, and Insignia (directly or through affiliates) has performed asset
management, partnership administration and investor relations services for the
Partnership. By reason of these relationships, the Managing General Partner has
conflicts of interest in considering the Offer. The Managing General Partner
has indicated in a Statement on Schedule 14D-9 (the "Schedule 14D-9") filed
with the Securities and Exchange Commission (the "Commission") that it is
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Units in response to the Offer. LIMITED PARTNERS ARE URGED
TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS AND THE SCHEDULE 14D-9
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
See Sections 10 and 13.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser and the Managing General Partner are affiliates
of and controlled by IPT, which is controlled by Insignia.
See Sections 11 and 13. The Managing 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 Managing 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 Managing 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
Managing General Partner in attempting to reconcile the
interests of the Purchaser (which is an affiliate of the
Managing General Partner) with the interests of the other
Limited Partners. See Section 10.
o The net asset value per Unit most recently estimated by an
affiliate of the Managing General Partner was $578 as of June
30, 1998, and the net liquidation value per Unit (the
"Estimated Liquidation Value") estimated by the Purchaser
(which is an affiliate of the Managing General Partner) in
connection with the Offer is $555.27. See Section 13 for a
discussion of why the Purchaser (which is an affiliate of the
Managing General Partner) believes that such estimates are
not necessarily indicative of the fair market value of a
Unit. THE PURCHASER (WHICH IS AN AFFILIATE OF THE MANAGING
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 Managing 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 Managing General Partner) to
purchase Units at a low price and the desire of the Limited
Partners to sell their Units at a high price.
o If the Purchaser is successful in acquiring a significant
number of Units pursuant to the Offer, the Purchaser (which
is an affiliate of the Managing General Partner) will have
the right to vote those Units and thereby significantly
influence all voting decisions with respect to the
Partnership, including decisions concerning liquidation,
amendments to the Limited Partnership Agreement, removal and
replacement of the Managing General Partner and the
individual general partner and mergers, consolidations and
other extraordinary transactions. This means that (i)
non-tendering Limited Partners could be prevented from taking
action they desire but that IPT (which is an affiliate of the
Managing General Partner) opposes and (ii) IPT (which is an
affiliate of the Managing General Partner) may be able to
take action desired by IPT but opposed by the non- tendering
Limited Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available
to Limited Partners wishing to sell their Units, there is no
formal trading market for Units. At present, Limited Partners
may seek to negotiate private sales or sales through a
trading system such as the American Partnership Board, which
publishes sell offers by Limited Partners in respect of
Units. Accordingly, THE OFFER AFFORDS LIMITED PARTNERS AN
OPPORTUNITY TO DISPOSE OF THEIR UNITS FOR CASH WHICH
OTHERWISE MIGHT NOT BE AVAILABLE TO THEM.
2
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. Although the Purchase Price is
approximately 13% less than the highest reported secondary
market sales price of any Unit (excluding Units transferred
by Insignia to IPLP) during the past six months (based on
published information and information provided by the
Managing General Partner), the Managing General Partner has
information that indicates that the highest reported sales
price represented a single, isolated transaction for a
minimal number of Units and such sales price was materially
higher than the range of sales prices for all other
transactions during the six- month period. Excluding the
isolated transaction, the Purchase Price is approximately 14%
higher than the highest reported sales price of $350 per Unit
for other transactions during the six-month period ended June
30, 1998. See Section 13. In addition, reported secondary
market sales prices do not take into account commissions and
transfer fees typically payable by a Limited Partner in
connection with a secondary market sale. Therefore, the
actual proceeds received by a Limited Partner who sells Units
in the secondary market are typically significantly less than
the reported sales prices.
o LIMITED PARTNERS WHO SELL UNITS PURSUANT TO THE OFFER WILL
NOT BE CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE
FROM 3% TO 10% OF THE SALES PRICE) OR PARTNERSHIP TRANSFER
FEES (WHICH ARE TYPICALLY $100 PER TRANSFER). The Purchaser
will pay all transfer fees imposed by the Partnership in
connection with sales of Units pursuant to the Offer.
o Real estate markets in the United States generally have
recovered and experienced an upward trend since the end of
the last recession. That recovery and upward trend might
continue. On the other hand, real estate markets also may be
adversely affected by a variety of factors, including
possible fluctuations in interest rates, economic slowdowns
and overbuilding. Accordingly, ownership of Units continues
to be a speculative investment. THE OFFER MAY PROVIDE LIMITED
PARTNERS WITH THE OPPORTUNITY TO LIQUIDATE THEIR INTERESTS IN
THE PARTNERSHIP AND REPLACE THEM WITH INVESTMENTS THAT ARE
LESS SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to
avoid in the future the expenses, delays and complications in
filing personal income tax returns which may be caused by
ownership of Units. In addition, A LIMITED PARTNER WHO SELLS
100% OF ITS UNITS PURSUANT TO THE OFFER WILL NO LONGER BE
SUBJECT TO THE PASSIVE ACTIVITY LOSS LIMITATION WITH RESPECT
TO "SUSPENDED" LOSSES ATTRIBUTABLE TO THOSE UNITS AND,
THEREFORE, WILL BE ABLE TO UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who
have become disenchanted with real estate investments
generally, and in particular with the perceived illiquidity
of investments made through limited partnerships, because it
may afford an immediate opportunity for those Limited
Partners to liquidate their investments in the Partnership.
On the other hand, Limited Partners who tender their Units
will be giving up the opportunity to participate in any
potential future benefits represented by the ownership of
those Units, including, for example, the right to participate
in any future distributions of cash or property, whether from
operations, the proceeds of a sale or refinancing of one or
more of the Partnership's properties or in connection with
any future liquidation of the Partnership. Instead, any such
distributions of cash or property with respect to Units
tendered in the Offer and purchased by the Purchaser will be
paid to the Purchaser.
The Purchaser (which is an affiliate of the Managing 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 Managing General
Partner that the Managing 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.
3
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. Although
the number of Units sought in the Offer will not give the Purchaser (which is
an affiliate of the Managing General Partner) absolute control over the
Partnership, if the Purchaser is successful in acquiring all or a substantial
portion of the Units it is tendering for, it will be in a position to exercise
significant influence over the outcome of any vote by Limited Partners. See
Sections 8, 10 and 13.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Units sold over (under)
such Limited Partner's adjusted tax basis in those Units, which may be taxable
as ordinary income or loss, capital gain or loss or gain from real estate
depreciation recapture. If a Limited Partner has suspended "passive losses"
from the Partnership or other passive activity investments, such Limited
Partner generally may deduct these losses up to the amount of any gain from the
sale. A sale pursuant to the Offer of all of a Limited Partner's Units will
terminate his or her investment in the Partnership and, commencing with the
year following the year of sale, the Limited Partner will no longer receive
Partnership tax information or have to report the complicated tax information
currently required of Limited Partners. See Section 6.
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives.
According to the Partnership's Prospectus dated August 13, 1986, the then
managing general partner (predecessor to the current Managing General Partner
and which at the time was not affiliated with Insignia or IPT) anticipated that
the Partnership would sell and/or refinance its properties five to seven years
after their acquisition, depending on the then current real estate and money
markets, economic climate and income tax consequences to the Limited Partners.
In general, the Managing General Partner regularly evaluates the Partnership's
properties by considering various factors, such as the Partnership's financial
position and real estate and capital markets conditions. The Managing General
Partner monitors each property's specific locale and sub-market conditions
evaluating current trends, competition, new construction and economic changes.
The Managing General Partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the Managing General Partner to sell,
refinance, upgrade with capital improvements or hold a particular Partnership
property. Based on the above considerations, the Managing General Partner has
determined that it is not in the best interest of Limited Partners to sell or
refinance any Partnership property at the present time. Under the Limited
Partnership Agreement the term of the Partnership will continue until December
31, 2011, 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 amending the Limited Partnership Agreement to authorize
Limited Partners to cause the Partnership to merge with another entity or
engage in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however. See
Section 14.
Distributions. The Partnership has made cash distributions to Limited
Partners of $27.17 per Unit in 1998 (through August 27), and made distributions
of $24.57 per Unit in 1997, $25.98 per Unit in 1996 and $47.48 per Unit in
1995. In total, original investors in the Partnership have received
distributions of only $584.59 in respect of their original $1,000 investment
made in 1988. See Section 9. The Partnership is currently generating positive
cash flow from operations, and the Purchaser (which is an affiliate of the
Managing General Partner) believes that the Partnership will continue to
generate positive cash flow from operations. The potential for future
distributions was considered by the Purchaser (which is an affiliate of the
Managing General Partner) when establishing the Purchase Price. Limited
Partners who tender their Units in response to the Offer will retain any
distributions made through August 27, 1998, and will be entitled to receive and
retain any subsequent distributions made by the Partnership prior to the date
on which the Purchaser pays for tendered Units pursuant to the Offer, although
any such subsequent distribution will result in a reduction of the Purchase
Price. See Section 1. However, tendering Limited Partners will not be entitled
to receive or retain any distributions in respect of tendered Units which are
made on or after the date on which the Purchaser pays for such Units pursuant
to the Offer, regardless of the fact
4
that the record date (as opposed to the payment date) for any such distribution
may be a date prior to the date of purchase. See Section 3.
Outstanding Units. According to information supplied by the
Partnership, as of August 1, 1998 there were 28,371.75 Units issued and
outstanding, which were held of record by 2,759 Limited Partners. IPLP
currently owns 2,482.83 (representing approximately 8.8%) of the outstanding
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.
5
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 Managing General Partner) will accept for payment (and thereby
purchase) up to 10,000 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 24, 1998, unless the Purchaser
(which is an affiliate of the Managing 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 SEPTEMBER 24, 1998, AND PRIOR TO THE DATE ON WHICH THE
PURCHASER PAYS FOR UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an affiliate
of the Managing 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 10,000 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 Managing General Partner) will, upon the terms and subject to the
conditions of the Offer, accept for payment and pay for an aggregate of 10,000
of the Units so tendered, pro rata according to the number of Units validly
tendered by each Limited Partner and not properly withdrawn on or prior to the
Expiration Date, with appropriate adjustments to avoid (i) purchases of
fractional Units and (ii) purchases that would violate Section 12.1 of the
Limited Partnership Agreement (which generally requires that, a partial tender
of Units must be for a minimum of five Units (or, in the case of Limited
Partners who hold Units in an IRA or Xxxxx Plan, two Units). If the number of
Units validly tendered and not properly withdrawn on or prior to the Expiration
Date is less than or equal to 10,000 Units, the Purchaser (which is an
affiliate of the Managing General Partner) will purchase all Units so tendered
and not withdrawn, upon the terms and subject to the conditions of the Offer.
If proration of tendered Units is required, then, subject to the
Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange Act of
1934 (the "Exchange Act") to pay Limited Partners the Purchase Price in respect
of Units tendered or return those Units promptly after the termination or
withdrawal of the Offer, the Purchaser (which is an affiliate of the Managing
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 Managing 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
Managing 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, 1998.
6
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 Managing 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
Managing 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 Managing 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 Managing 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 Managing
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 Managing General Partner)
reserves the right to transfer or assign, in whole or from time to time in
part, to one or more of the Purchaser's affiliates, the right to purchase Units
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the
rights of tendering Limited Partners to receive payment for Units validly
tendered and accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Units must be validly tendered and not withdrawn on or prior
to the Expiration Date. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest and any other documents required by
the Assignment of Partnership Interest must be received by the Depositary, at
its address set forth on the back cover of this Offer to Purchase, on or prior
to the Expiration Date. A Limited Partner may tender any or all of the Units
owned by that Limited Partner; provided, however, that because of restrictions
in the Limited Partnership Agreement, a partial tender of Units must be for a
minimum of five Units (or, in the case of Limited Partners who hold Units in an
IRA or Xxxxx Plan, at least two Units). Accordingly, any Limited Partner that
owns five or fewer Units (or, in the case of Limited Partners who hold Units in
an IRA or Xxxxx Plan, two Units), must tender all or none of its Units. Tenders
of fractional Units will not be permitted, except by a Limited Partner who is
tendering all of the Units owned by that Limited Partner. No alternative,
conditional or contingent tenders will be accepted.
7
Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Units and payment is to be made directly
to that holder, then no signature guarantee is required on the Assignment of
Partnership Interest. Similarly, if the Units are tendered for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial bank, savings
bank, credit union, savings and loan association or trust company having an
office, branch or agency in the United States (each an "Eligible Institution"),
no signature guarantee is required on the Assignment of Partnership Interest.
HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE ASSIGNMENT OF PARTNERSHIP
INTEREST MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. Please contact the
Information Agent for assistance in obtaining a signature guarantee.
Delivery of Assignment of Partnership Interest. The method of delivery
of the Assignment of Partnership Interest and all other required documents is
at the option and risk of the tendering Limited Partner, and delivery will be
deemed made only when actually received by the Depositary. In all cases,
sufficient time should be allowed to assure timely delivery.
Appointment as Proxy; Power of Attorney. By executing an Assignment of
Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the Managing 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 Managing 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 Managing 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 Managing 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 Managing
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 Managing 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 Managing General Partner a change of address form
instructing the Managing 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.
8
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 Managing 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 Managing General Partner), in its sole
discretion, which determination shall be final and binding. The Purchaser
(which is an affiliate of the Managing General Partner) reserves the absolute
right to reject any or all tenders of any particular Units determined by it not
to be in proper form or if the acceptance of or payment for those Units may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser (which is an
affiliate of the Managing 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 Managing
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 Managing 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 Managing 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, 1998. For withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Units to be withdrawn and must be signed by the person(s) who
signed the Assignment of Partnership Interest in the same manner as the
Assignment of Partnership Interest was signed (including signature guarantees
by an Eligible Institution). Units properly withdrawn will be deemed not to be
validly tendered for purposes of the Offer. Withdrawn Units may be re-tendered,
however, by following the procedures described in Section 3 at any time prior
to the Expiration Date.
9
If payment for Units is delayed for any reason or if the Purchaser
(which is an affiliate of the Managing 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 Managing General Partner), in its sole discretion, which
determination shall be final and binding. None of the Purchaser, the
Information Agent, the Depositary or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser (which is an affiliate of the Managing General Partner) expressly
reserves the right, in its sole discretion, at any time and from time to time,
(i) to extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, validly tendered Units,
(ii) to terminate the Offer if any condition referred to in Section 14 has not
been satisfied or upon the occurrence of any event specified in Section 14 and
(iii) to amend the Offer in any respect (including, without limitation, by
increasing the consideration offered, increasing or decreasing the number of
Units being sought, or both). Notice of any such extension, termination or
amendment will be disseminated promptly to Limited Partners in a manner
reasonably designed to inform Limited Partners of such change in compliance
with Rule 14d-4(c) under the Exchange Act. In the case of an extension of the
Offer, the extension will be followed by a press release or public announcement
which will be issued no later than 9:00 a.m., New York City time, on the next
business day after the then scheduled Expiration Date, in accordance with Rule
14e-1(d) under the Exchange Act.
If the Purchaser (which is an affiliate of the Managing 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 Managing 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
10
taxation that may be relevant to a particular Limited Partner in light of such
Limited Partner's specific circumstances or to certain types of Limited
Partners subject to special treatment under the federal income tax laws (for
example, foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor (except as otherwise expressly indicated) does
it describe any aspect of state, local, foreign or other tax laws. Sales of
Units pursuant to the Offer will be taxable transactions for federal income tax
purposes, and also may be taxable transactions under applicable state, local,
foreign and other tax laws. EACH LIMITED PARTNER SHOULD CONSULT ITS OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF
SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Limited Partner's "amount realized" on the sale and (ii) the
Limited Partner's adjusted tax basis in the Units sold. Generally, a Limited
Partner's adjusted tax basis with respect to a Unit equals its cost, increased
by the amount of income and the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit, and decreased by (i)
any distributions made with respect to such Unit, (ii) the amount of deductions
or losses allocated to the Unit and (iii) any decrease in the amount of
Partnership liabilities (as determined under Code Section 752) allocated to the
Unit. Thus, the amount of a Limited Partner's adjusted tax basis in tendered
Units will vary depending upon the Limited Partner's particular circumstances.
The "amount realized" with respect to a Unit will be a sum equal to the amount
of cash received by the Limited Partner for the Unit pursuant to the Offer,
plus the amount of the Partnership's liabilities allocable to the Unit (as
determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held by
the Limited Partner as a capital asset. Under the IRS Restructuring and Reform
Act of 1998, the capital gains rate for individuals and other non-corporate
taxpayers is 20% for sales of capital assets held for more than one year.
However, any gain from the sale of such assets attributable to the recapture of
depreciation with respect to real property (other than certain depreciation
recapture taxable as ordinary income) is taxed at a maximum rate of 25%.
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. A portion of the gain or
loss upon the sale of Units may be attributable to unrealized receivables. If
any portion of the amount of gain or loss realized by a Limited Partner is
attributable to "unrealized receivables" (which includes certain 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. In addition, a portion of such gain may be taxed at the
25% rate discussed above. 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).
11
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. A portion of any post-1986 losses of Limited
Partners from the Partnership may have been passive losses. Thus, Limited
Partners may have "suspended" passive losses from the Partnership (i.e.,
post-1986 net taxable losses in excess of statutorily permitted "phase-in"
amounts which have not been used to offset income from other passive activities
or from the Partnership). Substantially all gain or loss from a sale of Units
pursuant to the Offer will be passive income or loss.
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses, if any (including a portion of any loss
recognized on the sale of Units), can be currently deducted (subject to other
applicable limitations) to the extent of the Limited Partner's passive income
from the Partnership for that year (including any gain recognized on the sale
of Units) plus any other passive income for that year. If, on the other hand, a
Limited Partner sells 100% of its Units pursuant to the Offer, any "suspended"
losses and any losses recognized upon the sale of the Units will be offset
first against any other net passive gain to the Limited Partner from the sale
of the Units and any other net passive activity income from other passive
activity investments, and the balance of any "suspended" net losses from the
Units will no longer be subject to the passive activity loss limitation and,
therefore, will be deductible by such Limited Partner from its other income
(subject to any other applicable limitations), including ordinary income. If a
tendering Limited Partner has suspended passive losses from the Partnership,
such Limited Partner must sell all of its Units to receive these tax benefits.
If more than 10,000 of the outstanding Units are tendered, some tendering
Limited Partners may not be able to sell 100% of their Units pursuant to the
Offer because of proration of the number of Units to be purchased by the
Purchaser. See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). In the event of a termination, the Partnership's tax year would close
and the Partnership would be treated for income tax purposes as if it had
contributed all of its assets and liabilities to a "new" partnership in
exchange for an interest in the "new" partnership. The Partnership would then
be treated as making a distribution of the interests in the "new" partnership
to the new partners and the remaining partners, followed by the liquidation of
the Partnership. Because the "new" partnership would be treated as having
acquired its assets on the date of the deemed contribution, a new depreciation
recovery period would begin on such date, the Partnership's annual depreciation
deductions over the next few years would be substantially reduced, and the
Partnership would have greater taxable income (or less tax loss) than if no tax
termination occurred. In addition, depreciation may be required to be allocated
to those Limited Partners that have a higher tax basis. A tax termination of
the Partnership would also terminate any partnership in which the Partnership
holds a majority interest (50% or more).
The Limited Partnership Agreement prohibits transfers of Units if a
transfer, when considered with all other transfers during the same applicable
twelve-month period, would cause a termination of the Partnership for tax
purposes. The Purchaser believes that even if the maximum number of Units is
purchased pursuant to the Offer, those transfers will not cause a tax
termination of the Partnership.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign persons) 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.
12
Xxxx realized by a foreign Limited Partner on the sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under Code Section
1445, the transferee of an interest held by a foreign person in a partnership
which owns United States real property generally is required to deduct and
withhold a tax equal to 10% of the amount realized on the disposition. In order
to comply with this requirement, the Purchaser will withhold 10% of the amount
realized by a tendering Limited Partner unless the Limited Partner properly
completes and signs the FIRPTA Affidavit included as part of the Assignment of
Partnership Interest certifying the Limited Partner's TIN and address, and that
such Limited Partner is not a foreign person. Amounts withheld would be
creditable against a foreign Limited Partner's federal income tax liability
and, if in excess thereof, a refund could be obtained from the Internal Revenue
Service by filing a U.S. income tax return.
SECTION 7. EFFECTS OF THE OFFER.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of Units if a transfer, when considered with all other transfers
during the same applicable twelve-month period, would cause a termination of
the Partnership for federal income tax purposes. This provision may limit sales
of Units in the secondary market and in private transactions for the
twelve-month period following completion of the Offer. The Managing General
Partner has advised the Purchaser that the Partnership will not process any
requests for recognition of substitution of Limited Partners upon a transfer of
Units during such twelve-month period which the Managing General Partner
believes may cause a tax termination in contravention of the Limited
Partnership Agreement. In determining the number of Units for which the Offer
is made (representing approximately 35% of the outstanding Units), the
Purchaser (which is an affiliate of the Managing General Partner) took this
restriction into account so as to permit normal historical levels of transfers
to occur following the transfers of Units pursuant to the Offer without
violating this restriction.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Units are purchased pursuant to the
Offer, the result will be a reduction in the number of Limited Partners. In the
case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Units and,
therefore, the Purchaser (which is an affiliate of the Managing 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 Managing 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 Managing General
Partner) believes that, even if it purchases the maximum number of Units in the
Offer, after that purchase the Units will be held of record by more than 300
persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with Managing General Partner. The Purchaser (which is an
affiliate of the Managing 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 Managing 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. As a result, the Purchaser (which is
an affiliate of the Managing General Partner) could be in a position to
significantly influence all voting decisions with respect to the Partnership.
In general, IPLP and the Purchaser (which are affiliates of the Managing
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 Managing General Partner, also may be in the interest
13
of the Managing General Partner, but may not be in the interest of other
Limited Partners. This could (i) prevent non-tendering Limited Partners from
taking action they desire but that IPT opposes and (ii) enable IPT to take
action desired by IPT but opposed by non-tendering Limited Partners. Under the
Limited Partnership Agreement, Limited Partners holding a majority of the Units
are entitled to take action with respect to a variety of matters including:
removal of the Managing General Partner or the individual general partner and
in certain circumstances election of a new or successor managing general
partner or non-managing general partner; sale of all or substantially all of
the assets of the Partnership; dissolution of the Partnership; and most types
of amendments to the Limited Partnership Agreement.
The Offer will not result in any change in the compensation payable to
the Managing General Partner or its affiliates. However, as a result of the
Offer, the Purchaser (which is an affiliate of the Managing General Partner)
will participate, in its capacity as a Limited Partner, in any subsequent
distributions to Limited Partners to the extent of the Units purchased pursuant
to the Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the Managing 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 Managing General
Partner) also may consider disposing of some or all of the Units the Purchaser
acquires pursuant to the Offer, either directly or by a sale or other
disposition of one or more interests in IPT or IPLP, depending among other
things on the requirements from time to time of Insignia, IPT and their
affiliates in light of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the Managing
General Partner) has any present plans or intentions with respect to an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Partnership or a sale or refinancing of any of the Partnership's
properties. However, IPT and the Purchaser expect that consistent with the
Managing General Partner's fiduciary obligations, the Managing 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 Managing General
Partner) have been advised that the possible future transactions the Managing
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
Managing 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
Managing General Partner) or IPT itself), in any of which Limited Partners
might receive cash, common stock or other securities or consideration. There is
no assurance, however, as to when or whether any of the transactions referred
to above might occur. If any such transaction is effected by the Partnership
and financial benefits accrue to the Limited Partners of the Partnership, the
Purchaser (and thus IPT) will participate in those benefits to the extent of
its ownership of Units. A merger or other consolidation transaction and certain
kinds of other extraordinary transactions would require a vote of the Limited
Partners, and if the Purchaser is successful in acquiring a significant number
of Units pursuant to the Offer (or otherwise), IPT will be able to
significantly influence the outcome of any such vote. IPT's primary objective
in seeking to acquire the Units through the Purchaser pursuant to the Offer is
not, however, to influence the vote on any particular transaction, but rather
to generate a profit on the investment represented by those Units.
14
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Except as
otherwise indicated, information contained in this Section 9 is based upon
documents and reports publicly filed by the Partnership with the Commission.
General. The Partnership was organized on May 20, 1986 under the laws
of the State of Delaware. 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, hold and manage
existing residential and commercial real estate, and to sell and collect the
receivables derived from such properties.
The Partnership's investment portfolio currently consists of two
residential apartment complexes: a 256- unit residential complex in Plano,
Texas, and a 112-unit residential complex in Brandon, Florida. In addition, the
Partnership has an 82.5% interest in a joint venture which owns a 320-unit
residential apartment complex in Marietta, Georgia (the "Joint Venture").
Originally Anticipated Term of Partnership; Alternatives. According to
the Partnership's Prospectus dated August 13, 1986, the then managing general
partner (predecessor to the current Managing General Partner and which at the
time was not affiliated with Insignia or IPT) anticipated that the Partnership
would sell and/or refinance its properties five to seven years after their
acquisition, depending on the then current real estate and money markets,
economic climate and income tax consequences to the Limited Partners. Under the
Limited Partnership Agreement, the term of the Partnership will continue until
December 31, 2011, 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 amending the Limited Partnership Agreement to
authorize Limited Partners to cause the Partnership to merge with another
entity or engage in a "rollup" or similar transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the Managing General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital markets
conditions. The Managing General Partner monitors each property's specific
locale and sub-market conditions evaluating current trends, competition, new
construction and economic changes. The Managing General Partner oversees each
asset's operating performance and continuously evaluates the physical
improvement requirements. In addition, the financing structure for each
property, tax implications and the investment climate are all considered. Any
of these factors, and possibly others, could potentially contribute to any
decision by the Managing General Partner to sell, refinance, upgrade with
capital improvements or hold a particular Partnership property. There are no
plans to sell or refinance any Partnership property at the present time.
Selected Financial and Property-Related Data. Set forth below is a
summary of certain financial and statistical information with respect to the
Partnership and its properties, all of which has been excerpted or derived from
the Partnership's Annual Reports on Form 10-KSB for the years ended December
31, 1997, 1996, 1995, 1994 and 1993 and the Partnership's Quarterly Reports on
Form 10-QSB for the periods ended June 30, 1998 and 1997. More comprehensive
financial and other information is included in such reports and other documents
filed by the Partnership with the Commission, and the following summary is
qualified in its entirety by reference to such reports and other documents and
all the financial information and related notes contained therein.
15
DAVIDSON GROWTH PLUS, L.P.
SELECTED FINANCIAL DATA
(in thousands, except Unit data)
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ----------- ----------- ------------ ----------- ----------- -------
(UNAUDITED)
Statements of Operations Data:
Rental Income................. $ 2,491 $ 2,454 $ 4,987 $ 4,969 $4,702 $4,459 $ 4,652
Other Income.................. $ 126 $ 112 $ 245 $ 287 $ 266 $ 139 $ 113
Total Revenues............. $ 2,617 $ 2,566 $ 5,232 $ 5,256 $4,968 $4,598 $ 4,765
Income (Loss) from Operations
(before extraordinary item) $ 247 $ 152 $ 155 $ 329 $ 344 $ 124 $ (181)
Net Income (Loss)............. $ 247 $ 152 $ 155 $ 329 $ 344 $ 124 $ (181)
Net Income (Loss) per Unit.... $ 8.46 $ 5.18 $ 5.29 $ 11.25 $11.75 $ 4.25 $(25.86)
AS OF AS OF
JUNE 30, DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ----------- ----------- ------------ ----------- ----------- -------
(UNAUDITED)
Balance Sheets Data:
Total Assets................... $16,612 $17,278 $16,889 $17,475 $18,169 $19,581 $19,784
Total Liabilities.............. $12,379 $12,751 $12,740 $12,735 $12,964 $13,214 $13,200
Limited Partners' Equity (Deficit) $ 4,482 $ 4,925 $ 4,580 $ 5,127 $ 5,544 $6,558 $6,660
Units Outstanding.............. 28,371.75 28,371.75 28,371.75 28,371.75 28,371.75 28,371.75 28,371.75
Book Value per Unit............ $157.97 $173.59 $161.43 $180.71 $195.41 $231.15 $234.74
Description of Properties. Set forth below is a table showing the
location, the date of purchase, the nature of the Partnership's ownership
interest in and the use of each of the Partnership's properties.
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
------------------------ -------- --------------------------------------- ----------------------
Brighton Crest Phase I Fee ownership(1) Residential Apartments
Apartments 09/25/87 (subject to first and second mortgages) (320 Units)
Marietta, Georgia Phase II
12/15/87
The Fairway 05/18/88 Fee ownership Residential Apartments
Apartments (subject to first and second mortgages) (256 Units)
Plano, Texas
The Village 05/31/88 Fee ownership Residential Apartments
Apartments (subject to first and second mortgages) (112 units)
Brandon, Florida
(1) The Partnership has an 82.5% interest in a joint venture that owns
Brighton Crest Apartments (the "Joint Venture"), a 320-unit
residential apartment complex in Marietta, Georgia. Davidson Income
Real Estate, L.P., a real estate limited partnership which is an
affiliate of the Partnership, owns the remaining 17.5% of the Joint
Venture.
16
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value, accumulated depreciation and federal tax basis of
each of the Partnership's properties as of December 31, 1997 ($ amounts in
thousands).
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
----------------------------------- -------------- ------------- ---------- ----------- -----------
Brighton Crest Apartments $ 12,846 $ (5,273) 5-25 yrs. S/L $ 12,052
The Fairway Apartments 6,630 (2,188) 5-25 yrs. S/L 5,638
The Village Apartments 4,280 (1,699) 5-25 yrs. S/L 3,475
-------- ---------- ----------
TOTALS $ 23,756 $ 9,160 $ 21,165
======== ========== ==========
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1997 ($ amounts in thousands).
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1997 RATE AMORTIZED DATE MATURITY
---------------------------------- --------------- ----------- ------------ ------------- ------------
Brighton Crest Apartments
1st mortgage $ 6,134 7.83% 28.67 yrs. 10/15/03 $ 5,516
2nd mortgage 199 7.83% (1) 10/15/03 199
The Fairway Apartments
1st mortgage 3,854 7.60% 21.42 yrs. 11/15/02 3,142
2nd mortgage 135 7.60% (1) 11/15/02 135
The Village Apartments
1st mortgage 1,887 7.83% 28.67 yrs. 10/15/03 1,697
2nd mortgage 61 7.83% (1) 10/15/03 61
-------- --------
12,270 $ 10,750
Less unamortized discounts (283) ========
------------
TOTALS $ 11,987
============
(1) Interest only payments.
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for each of
the Partnership's properties during the past two years.
PROPERTY AVERAGE ANNUAL RENTAL RATE AVERAGE ANNUAL OCCUPANCY
----------------------------- ---------------------------------- ------------------------
1997 1996 1997 1996
------------ ----------- ---- ----
Brighton Crest Apartments (1) $ 8,207/unit $ 8,119/unit 93% 96%
The Fairway Apartments (1) $ 7,082/unit $ 7,143/unit 91% 97%
The Village Apartments $ 8,227/unit $ 8,104/unit 98% 98%
(1) The decrease in occupancy at Brighton Crest Apartments is attributable
to the new home purchases in this area. The decrease in occupancy at
The Fairway Apartments is due to a demand for units with more bedrooms
than are currently available at this complex.
17
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1997 for each of the Partnership's
properties.
1997 1997
PROPERTY BILLING RATE
---------------------------------------- ---------------------- -------------
Brighton Crest Apartments $ 187,000 3.25%
The Fairway Apartments $ 185,000 2.38%
The Village Apartments $ 76,000 2.45%
Other Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial results and other matters. Such reports and other documents may be
inspected at the Commission's Public Reference Section, Room 1024, 000 Xxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, where copies may be obtained at
prescribed rates, and at the regional offices of the Commission located in the
Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
and 7 World Trade Center, New York, New York 10048. Copies should be available
by mail upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000. The Commission also maintains a web site that contains reports, proxy
and other information filed electronically with the Commission, the address of
which is xxxx://xxx.xxx.xxx.
Cash Distributions History. The Partnership has made cash
distributions to Limited Partners of $27.17 per Unit in 1998 (through August
27, and made distributions of $24.57 per Unit in 1997, $25.98 per Unit in 1996
and $47.48 per Unit in 1995). In total, original investors in the Partnership
have received distributions of only $584.59 in respect of their original $1,000
investment made in 1988.
Operating Budgets of the Partnership. A summary of the fiscal 1997 and
1998 operating budgets and the audited results of operations for fiscal 1997 of
the Partnership are set forth in the table below. The budgeted amounts provided
below are figures that were not computed in accordance with generally accepted
accounting principles ("GAAP"). Historically, budgeted operating results of
operations for a particular fiscal year have differed significantly in certain
respects from the audited operating results for that year. In particular, items
that are categorized as capital expenditures for purposes of preparing the
operating budgets are often re-categorized as expenses when the financial
statements are audited and presented in accordance with GAAP. Therefore, the
summary operating budget presented for fiscal 1998 should not necessarily be
considered as indicative of what the audited operating results for fiscal 1998
will be. Furthermore, any estimate of the future performance of a business,
such as the Partnership's business, is forward-looking and based on numerous
assumptions, some of which inevitably will prove to be incorrect. For this
reason, it is probable that the Partnership's future operating results will
differ from those projected in the operating budget, and those differences may
be material. Therefore, such information should not be relied on by Limited
Partners.
FISCAL 1997 FISCAL 1997 FISCAL 1998
BUDGETED AUDITED BUDGETED
------------ ------------ ------------
Total Revenues from Property Operations...................... $ 4,741,000 $ 5,232,000 $ 5,508,000
Total Operating Expenses .................................... $ 2,623,000 $ 3,186,000 $ 2,618,000
Net Operating Income......................................... $ 2,118,000 $ 2,046,000 $ 2,890,000
Capital Expenditures......................................... $ 229,000 $ 187,000 $ 259,000
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The Managing 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 Managing General
Partner has conflicts of interest with respect to the Offer, including
conflicts resulting from its affiliation with IPT and the Purchaser. The
Managing 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 Managing General Partner
and/or its affiliates and (ii) as a consequence of the Purchaser's ownership of
Units, because the Purchaser (which
18
is an affiliate of the Managing 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 Managing General Partner in attempting to reconcile the
interests of the Purchaser (which is an affiliate of the Managing General
Partner) with the interests of the other Limited Partners. In addition, the
Purchaser (which is an affiliate of the Managing 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 Managing 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 Managing General Partner has
indicated in the Schedule 14D-9 that it is remaining neutral and making no
recommendation as to whether Limited Partners should tender their Units
pursuant to the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO
PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED MATERIALS CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Voting by the Purchaser. The Purchaser (which is an affiliate of the
Managing General Partner) will seek to be admitted to the Partnership as a
substituted Limited Partner upon consummation of the Offer and, when admitted,
will have the right to vote each Unit purchased pursuant to the Offer. Even if
the Purchaser (which is an affiliate of the Managing 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 Managing General Partner) and its
managers and designees as proxies with respect to the Units tendered by such
Limited Partners and accepted for payment by the Purchaser. See Section 3. As a
result, if the Purchaser (which is an affiliate of the Managing General
Partner) is successful in acquiring a significant number of Units pursuant to
the Offer, the Purchaser will have the right to vote those Units and thereby
significantly influence all voting decisions with respect to the Partnership.
In general, IPLP and the Purchaser (which are affiliates of the Managing
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
Managing General Partner, also may be in the interest of the Managing General
Partner, but may not be in the interest of other Limited Partners. This could
(i) prevent non-tendering Limited Partners from taking action they desire but
that IPT opposes and (ii) enable IPT to take action desired by IPT but opposed
by non-tendering Limited Partners. Under the Limited Partnership Agreement,
Limited Partners holding a majority of the Units are entitled to take action
with respect to a variety of matters including: removal of the Managing General
Partner or the individual general partner and in certain circumstances election
of a new or successor managing general partner or non-managing general partner;
sale of all or substantially all of the assets of the Partnership; dissolution
of the Partnership; and most types of amendments to the Limited Partnership
Agreement. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
Managing General Partner) expects to pay for the Units it purchases pursuant to
the Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand and, if necessary, funds available to it under
its credit facility (as described in Section 12) to make such contributions.
See Section 12. It is possible, however, that in connection with its future
financing activities, IPT or IPLP may cause or request the Purchaser (which is
an affiliate of the Managing 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 Managing General Partner may
experience a conflict of interest in seeking to reconcile the best interests of
the Partnership with the need of its affiliates for cash flow from the
Partnership's activities.
Transactions with Affiliates. Under the Limited Partnership Agreement,
the Managing General Partner and the individual general partner each holds an
interest in the Partnership and is entitled to participate in certain cash
distributions made by the Partnership to its partners. The Managing General
Partner and the individual general partner in the aggregate received from the
Partnership in respect of their interests in the Partnership cash distributions
of $23,000 to date in 1998, $21,000 in 1997, $23,000 in 1996 and $42,000 in
1995. The Partnership paid IRG property management fees for property management
services in the amounts of approximately $258,000, $259,000 and $243,000 for
the years ended December 31, 1997, 1996 and 1995, respectively, and has paid
IRG property management fees equal to $135,000 during the first six months of
1998. The Partnership reimbursed the Managing General Partner and its
affiliates (including Insignia) for expenses incurred in connection with asset
19
management and partnership administration services performed by them for the
Partnership for the years ended December 31, 1997, 1996 and 1995 in the amounts
of $149,000, $143,000 and $143,000, respectively, and has reimbursed them for
such services in the amount of $75,000 through June 30, 1998. The reimbursement
amounts for the years ended December 31, 1997 and 1996, and for the six months
ended June 30, 1998, include $18,000, $11,000 and $18,000, respectively, which
amounts were paid to an affiliate of the Managing General Partner for costs
incurred in connection with construction oversight services. For the period
January 1, 1996 through December 31, 1996, the Partnership insured its
properties under a master policy through an agency and insurer unaffiliated
with the Managing General Partner, and through an agency affiliated with the
Managing General Partner for the period January 1, 1997 through August 31,
1997. An affiliate of the Managing 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. That
agent assumed the financial obligations to the affiliate of the Managing
General Partner who received payments on these obligations from the agent.
Insignia and the Managing General Partner believe that the aggregate financial
benefit derived by Insignia and its affiliates from such arrangement was
immaterial.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the Managing
General Partner) is a recently formed entity controlled by IPT and organized
for the purpose of making the Offer. The Purchaser is a wholly-owned subsidiary
of IPLP. The Purchaser (which is an affiliate of the Managing 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 and during the 30 days preceding the Offer, and has no
significant assets or liabilities at the present time other than the units of
limited partnership interest acquired in such other offers. 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 limited partnership
units it acquires pursuant to such other offers.
The principal executive offices of the Purchaser (which is an
affiliate of the Managing General Partner) are located at One Insignia
Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and its
telephone number is (000) 000-0000. For certain information concerning the
managers of the Purchaser (which is an affiliate of the Managing General
Partner), see Schedule II to this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996, for the purpose
of acquiring and owning interests in multi-family residential properties,
principally through ownership of limited and general partner interests in real
estate limited partnerships (including the Partnership). IPT has been organized
and operates in a manner that will qualify it to be taxed as a real estate
investment trust ("REIT") under the Code. Substantially all of IPT's
investments are held through IPLP, which is the operating partnership of IPT.
IPT is presently the sole general partner and Insignia is presently the sole
limited partner of IPLP.
IPT has engaged Insignia to provide certain investment banking and
related services to IPT and IPLP, including in connection with the Offer.
Substantially all of IPT's assets consist of (i) interests in entities
which comprise or control the managing general partners of real estate limited
partnerships, including the Partnership (the "IPT Partnerships"), which
interests are held by IPT directly, and (ii) limited partner interests in the
IPT Partnerships, which interests are held through IPLP. The IPT Partnerships
own, in the aggregate, 349 properties containing approximately 73,000
residential apartment units and approximately 5.8 million square feet of
commercial space. See Schedule V for a list of the IPT Partnerships in which
IPT has a material investment.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which at the time
was an affiliate of IPT but has subsequently been merged into IPT, see Section
13) ("MAE GP"), and Angeles Mortgage Investment Trust, an unincorporated
California business trust ("AMIT"), entered into a definitive merger agreement
(the "AMIT Merger Agreement"), pursuant to which AMIT is to be merged with and
into IPT, with IPT being the surviving entity, in a stock for stock transaction
(the "AMIT Merger"). XXXX is a public company whose Class A shares trade on the
20
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's
common shares have been approved for listing on the American Stock Exchange
under the symbol "FFO," subject to consummation of the AMIT Merger) and it is
anticipated that Insignia and its affiliates will own approximately 57% of
post-merger IPT, the former AMIT shareholders (other than Insignia and its
affiliates) will own approximately 16% of post-merger IPT, and the current
unaffiliated shareholders of IPT will own the remaining 27% of post-merger IPT
(see, however, the discussion of the merger of Insignia and AIMCO in the
following subsection of this Section 9 captioned "Insignia").
The XXXX Xxxxxx is expected to be completed in early September 1998.
However, consummation of the AMIT Merger is subject to several conditions,
including approval of the AMIT Merger Agreement and the AMIT Merger by the
shareholders of AMIT. Accordingly, there can be no assurance as to when the
AMIT Merger will occur, or that it will occur at all.
The principal executive offices of IPT and IPLP are located at One
Insignia Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and
the telephone number of each is (000) 000-0000. For certain information
concerning the trustees and executive officers of IPT, see Schedule III to this
Offer to Purchase. IPLP does not have any officers or employees.
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
INSIGNIA PROPERTIES TRUST SELECTED
CONSOLIDATED FINANCIAL INFORMATION (in
thousands, except share and unit data)
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997 DECEMBER 31, 1997 DECEMBER 31, 1996
---------------- ---------------- ----------------- -----------------
(unaudited) (unaudited) (audited) (audited)
Statements of Operations Data:
Revenues.......................... $ 12,977 $ 6,715 $ 16,826 $ 9,705
Income Before Extraordinary Item.. $ 9,164 $ 1,248 $ 6,074 $ 3,557
Net Income........................ $ 8,907 $ 1,248 $ 6,004 $ 2,425
Supplemental Data:
Funds From Operations(1).......... $ 16,825 $ 8,718 $ 20,939 $ 12,563
IPT Common Shares Outstanding..... 19,427,760 15,501,487 18,573,151 11,168,036
IPLP Units Outstanding............ 9,934,476 8,399,499 9,415,947 8,399,499
----------- ----------- ---------- ----------
IPT Common Shares and IPLP
Units Outstanding(2).......... 29,362,236 23,900,986 27,989,098 19,567,535
========== ========== ========== ==========
Balance Sheets Data:
Cash.............................. $ 14,639 $ 35,520 $ 37,432 $ 4,928
Investments in IPT Partnerships(3) $ 192,832 $ 124,951 $ 159,469 $ 118,741
Long-Term Debt.................... $ 21,951 $ 19,950 $ 19,300 $ 19,730
Shareholders' Equity(4)........... $ 212,697 $ 163,466 $ 200,659 $ 121,068
(1) Funds from Operations represent income or loss from real estate operations,
which is net income or loss in accordance with GAAP, excluding gains or
losses from debt restructuring or sales of property, plus depreciation and
provision for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) As of June 30, 1998, represented IPT's investment in 41 of the 124 IPT
Partnerships which IPT accounts for using the equity method. Of the
remaining 83 IPT Partnerships, IPT accounts for 81 using the cost method
and two using the consolidation method.
(4) Includes Insignia's minority interest in IPLP.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of commercial
properties. Insignia's real estate services include property management,
providing all of the day-to-day services
21
necessary to operate a property, whether residential or commercial; asset
management, including long-term financial planning, monitoring and implementing
capital improvement plans, and development and execution of refinancings and
dispositions; real estate leasing and brokerage; maintenance and construction
services; marketing and advertising; investor reporting and accounting; and
investment banking, including assistance in workouts and restructurings,
mergers and acquisitions, and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 3,800 properties, which include approximately 272,000 residential
units (including cooperative and condominium units), and in excess of 208
million square feet of retail, commercial and industrial space, located in over
500 cities in 48 states, Italy, the United Kingdom and Germany. Insignia
currently provides partnership administration services to approximately 900
limited partnerships having approximately 350,000 limited partners. Insignia is
a public company whose stock is traded on the New York Stock Exchange under the
symbol IFS.
On March 17, 1998, Insignia and Apartment Investment and Management
Company, a Maryland corporation ("AIMCO"), entered into a definitive merger
agreement (as amended and restated, the "AIMCO Merger Agreement"), pursuant to
which substantially all of Insignia's residential real estate operations and
ownership interests, including its interests in IPT and IPLP, are to be merged
with and into AIMCO, with AIMCO as the surviving corporation (the "AIMCO
Merger"). AIMCO is a public REIT whose Class A shares trade on the New York
Stock Exchange under the symbol AIV. The XXXXX Xxxxxx is expected to be
completed early in the fourth quarter of 1998. However, consummation of the
AIMCO Merger is subject to certain conditions, including the approval of the
shareholders of Insignia. Accordingly, there can be no assurance as to when the
AIMCO Merger will occur, or that it will occur at all.
Assuming the AIMCO Merger is consummated, AIMCO will succeed to
Insignia's ownership of IPT and IPLP, and thus IPT (and the Partnership) will
thereafter be controlled by AIMCO. In addition, AIMCO is required pursuant to
the AIMCO Merger Agreement to acquire all of the outstanding shares of IPT not
owned by Insignia by causing IPT to merge with and into AIMCO (or a subsidiary
of AIMCO) as soon as practicable after the consummation of the AIMCO Merger, in
which event IPT would cease to exist as a separate entity and AIMCO would
effectively own all of the Units acquired by the Purchaser pursuant to the
Offer.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Certain information, as of
particular dates, concerning Insignia's business, principal properties, capital
structure, material pending legal proceedings, operating results, financial
condition, directors and officers (including their remuneration and stock
options granted to them), the principal holders of Insignia's securities, any
material interests of such persons in transactions with Insignia and certain
other matters is required to be disclosed in proxy statements and annual
reports distributed to Insignia's shareholders and filed with the Commission.
Such reports, proxy statements and other information may be inspected and
copied at the Commission's public reference facilities and should also be
available for inspection in the same manner as set forth with respect to the
Partnership in Section 9.
Insignia's principal executive offices are located at Xxx Xxxxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its telephone number is
(000) 000-0000. For certain information concerning the directors and executive
officers of Insignia, see Schedule 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, 1997, 1996 and 1995 and the six-month periods ended June 30,
1998 and 1997. More comprehensive financial and other information is included
in Insignia's Annual Report on Form 10-K for the year ended December 31, 1997
(including management's discussion and analysis of financial condition and
results of operations) and in other reports and documents filed by Insignia
with the Commission. The financial information set forth below is qualified in
its entirety by reference to such reports and documents filed with the
Commission and the financial statements and related notes contained therein.
These reports and other documents may be examined and copies thereof may be
obtained in the manner set forth above.
22
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------------- -------------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------ ------------ ----------
(unaudited)
Statements of Operations Data:
Total Revenues.................................. $ 281,254 $ 154,527 $ 400,843 $ 227,074 $ 123,032
Income Before Taxes and Extraordinary Item...... $ 12,134 $ 7,630 $ 17,055 $ 14,946 $ 10,093
Net Income...................................... $ 6,674 $ 4,578 $ 10,233 $ 8,564 $ 5,806
Earnings Per Share.............................. $ 0.19 $ 0.14 $ 0.32 $ 0.26 $ 0.20
AS OF AS OF
JUNE 30, DECEMBER 31,
------------------------- -------------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------ ------------ ----------
(unaudited)
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 57,807 $ 88,847 $ 88,847 $ 54,614 $ 49,846
Receivables..................................... $ 147,569 $ 122,180 $ 122,180 $ 46,040 $ 26,445
Total Assets................................ $ 954,189 $ 800,223 $ 800,223 $ 492,402 $ 245,409
Accounts Payable................................ $ 16,205 $ 13,705 $ 13,705 $ 1,711 $ 1,497
Commissions Payable............................. $ 54,467 $ 51,285 $ 51,285 $ 18,736 $ 602
Accrued and Sundry Liabilities.................. $ 105,658 $ 102,009 $ 102,009 $ 40,741 $ 25,619
Long-Term Debt.................................. $ 289,335 $ 189,704 $ 189,704 $ 69,140 $ 42,996
Total Liabilities........................... $ 465,665 $ 356,703 $ 356,703 $ 130,328 $ 70,714
Redeemable Convertible Preferred Stock.......... -- -- -- -- $ 15,000
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 144,210 $ 144,065 $ 144,065 $ 144,169 --
Minority Interest in Consolidated Subsidiaries.. $ 66,484 $ 61,546 $ 61,546 -- $ 2,682
Shareholders' Equity........................ $ 277,830 $ 237,909 $ 237,909 $ 217,905 $ 157,013
Except as otherwise set forth herein and in Schedule I, none of the
Purchaser (which is an affiliate of the Managing General Partner), IPLP, IPT,
Insignia or, to the best of the Purchaser's knowledge, any of the persons
listed on Schedules II, III or IV hereto, or any affiliate of the foregoing,
(i) beneficially owns or has a right to acquire any Units, (ii) has effected
any transaction in the Units in the last 60 days, or (iii) has any contract,
arrangement, understanding or relationship with any other person with respect
to any securities of the Partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
Xxxxxx X. Xxxxxx, who is the Chairman of the Board, Chief Executive Officer and
President of Insignia and a trustee of IPT, beneficially owns approximately 18%
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 Managing General Partner) expects that approximately $4,250,000 will be
required to purchase 10,000 Units, if tendered, and to pay related fees and
expenses. The Purchaser (which is an affiliate of the Managing General Partner)
expects to obtain all of those funds from IPLP, which in turn intends to use
its cash on hand and borrowings from its credit facility with a commercial bank
and financial institution. The Purchaser has not conditioned the Offer on
obtaining financing.
The following is a summary description of the existing credit facility
(the "Facility") provided for the benefit of IPLP pursuant to the Credit
Agreement, dated as of December 30, 1997 (the "Credit Agreement"), among IPLP,
as borrower, Xxxxxx Commercial Paper, Inc., as syndication agent, First Union
National Bank, as administrative agent and the lenders from time to time
parties thereto (the "Lenders"). This summary description does not purport to
be complete and is qualified in its entirety by reference to the Credit
Agreement, a copy of which has been filed as an exhibit to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission.
23
Pursuant to the Credit Agreement, the Lenders have made available to
IPLP a revolving credit facility of up to $50 million at any one time
outstanding. Loans under the Facility (the "Loans") may be utilized to finance
certain permitted investments and refinance certain investments made prior to
the date of the Credit Agreement. The Facility matures in a single installment
on December 30, 2000.
Loans bear interest, at IPLP's election, (i) at a rate equal to the
higher of (a) the rate announced from time to time by First Union National Bank
as its base lending rate or (b) the daily effective federal funds rate as
quoted by First Union National Bank; or (ii) at rates based on the London
interbank offered rate, as adjusted for certain reserve and other requirements
applicable to lenders, for one-, two-, three- or six-month periods plus an
interest margin of 2.50%. As of the date hereof, IPT has no outstanding
indebtedness under the Facility.
IPT is obligated to pay a commitment fee at a rate of 0.25% per annum
on the undrawn portion of the Facility. Such commitment fee is payable
quarterly in arrears and calculated based on the actual number of days elapsed
over a 365-day year.
The Loans are subject to mandatory prepayment only to the extent that
the aggregate outstanding principal amount of the Loans on any day exceeds the
amount of the Facility then in effect. Voluntary prepayments of the Loans and
voluntary reductions of the Facility are permitted, in whole or in part, at the
option of IPLP in minimum principal amounts, without premium or penalty,
subject to reimbursement of certain of the Lenders' costs under certain
conditions.
IPLP's obligations under the Facility have been guaranteed by IPT and
such guaranty is secured by a first priority pledge of and security interest in
the capital stock or other equity interests held by IPT in each of the
subsidiaries of IPT which directly or indirectly owns or controls the general
partner interest (including an interest in the Managing General Partner) in any
Real Estate Entity (as defined below) in which IPLP directly or indirectly owns
a limited partner interest (including the Partnership). In addition, the
Facility is secured by a first priority pledge of and security interest in all
limited partnership interests from time to time owned by IPLP and the equity
interests from time to time held by IPLP in any subsidiary of IPLP which itself
owns limited partnership interests. The Credit Agreement defines a "Real Estate
Entity" as any limited partnership, limited liability company, corporation or
other entity which has as its principal business the ownership of real property
or debt secured by real property. Thus, the IPT Partnerships (including the
Partnership) constitute Real Estate Entities for purposes of the Credit
Agreement.
The Facility contains representations and warranties, conditions
precedent, covenants, events of default and other provisions customarily found
in similar transactions.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation With the Managing General Partner. The Managing General
Partner is the successor to Davidson Diversified Properties, Inc., which was
the original managing general partner of the Partnership and an affiliate of
Insignia. Since December 31, 1996, the Managing General Partner has been a
wholly-owned subsidiary of IPT. Prior to that time, the Managing General
Partner was a wholly-owned subsidiary of MAE GP Corporation. Effective December
31, 1996, an affiliate of Insignia contributed all of the equity interests in
the Managing General Partner to IPT in connection with the formation of IPT.
Previous Tender Offer. In December 1995, DGP Acquisition, L.L.C. ("DGP
Acquisition"), which was an affiliate of Insignia, purchased approximately
2,049 (or approximately 7.2%) of the outstanding Units, at a purchase price of
$240 per Unit, pursuant to a tender offer commenced in December 1995. All of
the Units held by DGP Acquisition have since been contributed to IPLP and DGP
Acquisition has been dissolved.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the Managing General Partner) reviewed
certain publicly available information and certain information made available
to it by the Managing 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
24
year ended December 31, 1997 and the Partnership's Quarterly Report on Form
10-QSB for the period ended June 30, 1998; (iii) unaudited results of
operations of the Partnership's properties for the period since the beginning
of the Partnership's current fiscal year; (iv) the operating budgets prepared
by IRG with respect to the Partnership's properties for the year ending
December 31, 1998; and (v) other information obtained by IRG, Insignia and
other affiliates in their capacities as providers of property management, asset
management and partnership administration services to the Partnership. The
Purchaser's determination of the Purchase Price was based on its review and
analysis of the foregoing information, the other financial information and
analyses concerning the Partnership summarized below. In determining the
Purchase Price, the Purchaser did not rely upon any material, non-public
information concerning the Partnership not summarized below or elsewhere in
this Offer to Purchase.
Trading History of Units Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the Managing General Partner, from July
1, 1996 to June 30, 1998 an aggregate of 505.5 Units (representing less than
1.8% of the total outstanding Units) was transferred (excluding the Units
transferred by Insignia to IPLP in February 1998) in sale transactions. Set
forth in the table below are the high and low sales prices of Units for the
quarterly periods from July 1, 1996 to June 30, 1998, as reported by the
Managing General Partner and by The Partnership Spectrum, which is an
independent, third-party source. The gross sales prices reported by The
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of Units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices;
thus the Purchaser does not know whether the information compiled by The
Partnership Spectrum is accurate or complete. The transfer paperwork submitted
to the Managing 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.
DAVIDSON GROWTH PLUS, L.P.
REPORTED SALES PRICES OF PARTNERSHIP UNITS
AS REPORTED BY AS REPORTED BY
THE MANAGING GENERAL PARTNER(A) THE PARTNERSHIP SPECTRUM(B)
------------------------------- ---------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
-------------- -------------- --------- -----------
Fiscal Year Ended December 31, 1998:
Second Quarter.................................... $250 $460(c) $320 $336
First Quarter..................................... 315 350 336 336
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................... 328 500 275 316
Third Quarter ................................... 175 474 260 340
Second Quarter.................................... 130 328 226 328
First Quarter .................................... 100 285 250 325
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... 175 265 281 322
Third Quarter..................................... 200 263 213 265
(a) Although the Managing 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 Managing General Partner processes transfers of
Units 4 times per year - on the first day of each calendar quarter. The
prices in the table are based solely on information provided to the
Managing 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 Managing General Partner) does not know
whether the information compiled by The Partnership Spectrum is accurate
or complete.
(c) The Managing General Partner has information that indicates this reported
sales price represented a single, isolated transaction for a minimal
number of Units and such sales price was materially higher than the range
of sales prices for all other transactions during the quarter. The
Purchase Price is approximately 14% higher than the range of sales prices
for all other transactions during the six-month period prior to June 30,
1998.
25
The Purchaser (which is an affiliate of the Managing General Partner)
believes that, although secondary market sales information probably is not a
reliable measure of value because of the limited and inefficient nature of the
market for Units, this information may be relevant to a Limited Partner's
decision as to whether to tender its Units pursuant to the Offer. At present,
privately negotiated sales and sales through intermediaries (e.g., through the
trading system operated by American Partnership Board, Inc., which publishes
sell offers by holders of Units) are the only means available to a Limited
Partner to liquidate an investment in Units (other than the Offer) because the
Units are not listed or traded on any exchange or quoted on NASDAQ.
Managing General Partner's Estimates of Net Asset Value. An affiliate
of the Managing General Partner prepared an estimate of the Partnership's net
asset value per Unit in connection with an offer to purchase up to 4.9% of the
outstanding Units commenced by a party unaffiliated with the Purchaser, IPLP,
IPT or Insignia in August 1998. That estimate of the Partnership's net asset
value per Unit as of June 30, 1998 was $578 per Unit. The Managing General
Partner also prepares annual estimates of the Partnership's net asset value per
Unit. The Managing General Partner's three most recent estimates of the
Partnership's net asset value per Unit were $489, $495 and $405 as of December
31, 1997, 1996 and 1995, respectively. The Managing General Partner estimates
net asset value based on a hypothetical sale of the Partnership's wholly-owned
properties and the Joint Venture's property and the distribution to the Limited
Partners, the Managing General Partner and the other general partner of the
gross proceeds of such sales, net of related indebtedness, together with the
cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the
other known liabilities of the Partnership and the Joint Venture. The net asset
value estimates prepared by the Managing General Partner do not take into
account (i) timing considerations or (ii) costs associated with winding up the
Partnership and the Joint Venture. Therefore, the Purchaser believes that the
Managing General Partner's estimates of net asset value per Unit do not
necessarily represent either the fair market value of a Unit or the amount a
Limited Partner reasonably could expect to receive if the Partnership's
wholly-owned properties and the Joint Venture's property were sold and the
Partnership (and the Joint Venture) was liquidated. For this reason, the
Purchaser considered the Managing General Partner's net asset value estimates
to be less meaningful in determining the Purchase Price than the pro forma
liquidation analysis described below.
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's wholly-owned properties and the
Joint Venture's property, the Purchaser utilized the capitalization of income
approach. The estimate of the gross real estate value of the Partnership's
wholly-owned properties and the Joint Venture's property 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 wholly-owned properties or the Joint Venture's
property based upon any other valuation method.
The following is a description of the methodology employed by the
Purchaser in preparing such estimates of the value of the properties owned by
the Partnership (as used below, "net operating income" is calculated before
depreciation, amortization, debt service payments and certain capital
expenditure items):
THE FAIRWAY APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($886,456) generated by the property for the six
months ended June 30, 1998 (comprised of $854,895 of gross rental income and
$31,561 of other income), and then deducted from this amount the total
operating expenses of the property for the six months ended 1998 ($420,283),
resulting in the Purchaser's estimated net operating income for the six months
ended 1998 ($466,173). The Purchaser then annualized this amount, resulting in
estimated annual net operating income of $932,346 and then reduced the
estimated annual net operating income amount by $350 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 estimate adjusted net operating income amount
($842,746) at a 9.5% capitalization rate, resulting in an estimated in an
estimated gross property value of $8,871,011.
THE VILLAGE APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($486,674) generated by the property for the six
months ended June 30, 1998 (comprised of $474,349 of gross rental income and
$12,325 of other income), and then deducted from this amount the total
operating expenses of
26
the property for the six months ended 1998 ($225,538), resulting in the
Purchaser's estimate of net operating income for the six months ended 1998
($261,136). The Purchaser than annualized this amount, resulting in estimated
annual net operating income of $522,272, and then reduced the estimated annual
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 ($511,072) at a
9.5% capitalization rate, resulting in an estimated gross property value of
$5,379,705.
BRIGHTON CREST APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($1,214,741) generated by the property for
the six months ended June 30, 1998 (comprised of $1,158,107 of gross rental
income and $56,634 of other income), and then deducted from this amount the
total operating expenses of the property for the six months ended 1998
($538,152), resulting in the Purchaser's estimate of net operating income for
the six months ended 1998 ($676,589). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,353,178, and
then increased the estimated annual net operating income amount by $250 per
apartment unit, representing the Purchaser's estimate of the adjustment that
would be imputed by a third party purchaser in underwriting the operating
expenses, including normal replacement reserves, of the property for valuation
purposes. Finally, the Purchaser capitalized its estimated adjusted net
operating income amount ($1,433,178) at a 9% capitalization rate, resulting in
an estimated gross property value of $15,924,200. The Purchaser then estimated
the portion of the gross real estate value attributable to the Partnership,
based on the Partnership's 82.5% interest in the Joint Venture which owns the
property, resulting in a valuation of $13,137,465.
Based on the individual estimates of the gross values of the
Partnership's wholly-owned properties and the Joint Venture's property
described above, the Purchaser estimated that the current aggregate gross real
estate value is $27,388,181 (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 wholly-owned
properties and the Joint Venture's property 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 wholly-owned properties and the Joint Venture's property (without
taking into account the costs of disposing of those 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 wholly-owned properties and the Joint Venture's property 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
wholly-owned properties (or the Joint Venture's property) 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 Joint Venture's property and the Partnership's
wholly-owned properties or the other liabilities of the Partnership and the
Joint Venture, (ii) cash and other assets held by the Partnership and the Joint
Venture, (iii) real estate transaction costs that would be incurred on a sale
of the Partnership's wholly-owned properties or the Joint Venture's property,
such as brokerage commissions and other selling and closing expenses, (iv)
timing considerations or (v) costs associated with winding up the Partnership
or the Joint Venture. For this reason, the Purchaser considers the Gross Real
Estate Value Estimate to be less meaningful in evaluating the Purchase Price
offered by the Purchaser than its pro forma estimate of the net liquidation
value per Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, which are a relatively illiquid
investment, and is not offering to purchase the Partnership's underlying assets
or assume any of its liabilities. Consequently, the Purchaser does not believe
that the per-Unit amount which might be distributed to Limited Partners
following a future sale of the Partnership's wholly-owned properties and the
Joint Venture's property necessarily reflects the present fair value of a Unit.
Conversely, the realizable value of the
27
Partnership's assets clearly is a relevant factor in determining the price a
prudent purchaser would offer for Units. In considering this factor, the
Purchaser made a pro forma calculation of the amount each Limited Partner might
receive in a theoretical orderly liquidation of the Partnership (which may not
be realistically possible, particularly in the near term, due to real estate
market conditions, the general difficulty of disposing of real estate in a
short period of time, and other general economic factors), based on the Gross
Real Estate Value Estimate (as described above) and the other considerations
described below. The Purchaser based its pro forma liquidation analysis on the
Gross Real Estate Value Estimate (and thus on the Purchaser's estimates of the
values of the Partnership's wholly-owned properties and the Joint Venture's
property, each as described above) as opposed to the value estimated by the
Managing General Partner ([each,] 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 wholly-owned properties.
In estimating the pro forma net liquidation value per Unit, the
Purchaser adjusted its Gross Real Estate Value Estimate of $27,388,181 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses and security deposits). Specifically, the Purchaser added the
amounts of cash, accounts receivable and escrow deposits shown on the
Partnership's unaudited balance sheet at June 30, 1998 ($1,950,000), and
subtracted the mortgage debt encumbering the Partnership's wholly-owed
properties ($11,895,000) and all other liabilities shown on that balance sheet
($712,000). The Purchaser then deducted $446,000, representing the distribution
made by the Partnership in August 1998. In addition, the Purchaser valued its
82.5% interest in Brighton Crest Apartments based on the Joint Venture's
unaudited balance sheet at June 30, 1998. The Purchaser estimated the amount of
cash, accounts receivable and escrow deposits reflected on that balance sheet
($420,542) and subtracted the mortgage debt encumbering the Joint Venture's
property ($6,211,096) and all other liabilities shown on that balance sheet
($218,567). The Purchaser then multiplied the result (-$6,009,121) by the 17.5%
interest that it does not own in the Joint Venture, and added such amount
($1,051,596) to the adjusted Gross Real Estate Value Estimate as well. The
Purchaser then deducted $1,095,527 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, $16,241,250, represents the
Purchaser's pro forma estimate of the aggregate net liquidation proceeds
(before provision for the costs described in the following sentence) which
could be realized on an orderly liquidation of the Partnership, based on the
assumptions implicit in the calculations described above. The Purchaser did
not, however, deduct any amounts in respect of the legal and other costs which
the Purchaser expects would be incurred in a liquidation, including costs of
negotiating purchase and sale contracts, possibly conducting a consent
solicitation in order to obtain the Limited Partners' approvals for the sales
as may be required by the Limited Partnership Agreement, and winding up the
Partnership, because of the difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser then
deducted 3%, which would be the percentage allocable to the Managing General
Partner in respect of its non-subordinated interest in the Partnership, and the
remaining $15,754,013 was then divided by the 28,371.75 Units reported as
outstanding by the Managing General Partner as of August 1, 1998. The resulting
estimated pro forma liquidation value was $555.27 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 are
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 Managing 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
28
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 ended June 30, 1998
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 wholly-owned properties and the Joint Venture's property than the
capitalization rates applied by the Purchaser. For example, a 5% increase or
decrease in the value of the Partnership's properties (including the Joint
Venture's property) would produce a corresponding increase or decrease in the
Estimated Liquidation Value of approximately $45 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 predictive
of the likely result of any future transactions.
Litigation. On March 24, 1998, certain persons claiming to own limited
partner interests in certain limited partnerships (including the Partnership)
whose general partners (the "General Partners") are affiliates of Insignia (the
"Partnerships") filed a purported class and derivative action in California
Superior Court in the County of San Mateo (the "San Mateo Complaint") against
Insignia, the General Partners (including the Managing General Partner),
certain persons and entities who purportedly formerly controlled the General
Partners, and additional entities affiliated with and individuals who are
officers, directors and/or principals of several of the defendants. The San
Mateo Complaint contains allegations that, among other things, (i) the
defendants breached their fiduciary duties to the plaintiffs by selling or
agreeing to sell their "fiduciary positions" as stockholders, officers and
directors of the General Partners for a profit and retaining said profit rather
than distributing it to the plaintiffs; (ii) the defendants breached their
fiduciary duties by mismanaging the Partnerships and misappropriating the
assets of the Partnerships by (a) manipulating the operations of the
Partnerships to depress the trading price of limited partnership units (the
"Units") of the Partnerships; (b) coercing and fraudulently inducing
unitholders to sell Units to certain of the defendants at depressed prices; and
(c) using the voting control obtained by purchasing Units at depressed prices
to entrench certain of the defendants' positions of control over the
Partnerships; and (iii) the defendants breached their fiduciary duties to the
plaintiffs by (a) selling assets of the Partnerships such as mailing lists of
unitholders; and (b) causing the General Partners to enter into exclusive
arrangements with their affiliates to sell goods and services to the General
Partners, the unitholders and tenants of Partnership properties. The San Mateo
Complaint also alleges that the foregoing allegations constitute violations of
various California securities, corporate and partnership statutes, as well as
conversion and common law fraud. The San Mateo Complaint seeks unspecified
compensatory and punitive damages, an injunction blocking the sale of control
of the General Partners to AIMCO and a court order directing the defendants to
discharge their fiduciary duties to the plaintiffs. On June 24, 1998, the
Managing General Partner filed a motion seeking dismissal of the action. IPT
and Insignia believe that the allegations contained in the San Mateo Complaint
are without merit and intend to vigorously contest the plaintiffs' action.
On July 30, 1998, certain entities claiming to own limited partnership
interests in certain limited partnerships (including the Partnership) whose
general partners are affiliates of Insignia, IPT and the Purchaser (the
"Affiliated General Partners") filed a complaint in the Superior Court of the
State of California, County of Los Angeles (the "Los Angeles Complaint")
against Insignia, the Subject Partnerships (defined below), the Affiliated
General Partners and additional entities affiliated with several of the
defendants. The action involves 44 real estate limited partnerships (each named
as a defendant) in which the plaintiffs allegedly own interests and which
Insignia affiliates allegedly manage or control (the "Subject Partnerships").
Plaintiffs allege that they have requested from, but have been denied by each
of the Subject Partnerships, lists of their respective limited partners for the
purpose of making tender offers to purchase up to 4.9% of the units of limited
partnership interest in each of the Subject Partnerships. The Los Angeles
Complaint also alleges that certain of the defendants made tender offers to
purchase units of limited partnership interest in many of the Subject
Partnerships, with the alleged result that plaintiffs have been deprived of the
benefits they would have realized from ownership of the additional units. The
plaintiffs assert eleven causes of action, including breach of contract, unfair
business practices, and violations of the partnership statutes of the states in
which the Subject Partnerships are organized. Plaintiffs seek compensatory,
punitive and treble damages. Insignia was only recently served with the Los
Angeles Complaint and has not yet responded to it. Xxxxxxxx believes the claims
to be without merit and intends to defend the action vigorously.
29
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
the Offer, the Purchaser (which is an affiliate of the Managing General
Partner) will not be required to accept for payment or to pay for any Units
tendered if all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, necessary for the consummation of the
transactions contemplated by the Offer shall not have been filed, occurred or
been obtained prior to the Expiration Date. Furthermore, notwithstanding any
other term of the Offer and in addition to the Purchaser's right to withdraw
the Offer at any time before the Expiration Date, the Purchaser (which is an
affiliate of the Managing 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 Managing 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 Managing 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 Managing 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.
30
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the Managing 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 Managing 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 Managing 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 Managing 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
Managing General Partner) to elect to terminate the Offer without purchasing
Units thereunder.
Antitrust. The Purchaser (which is an affiliate of the Managing
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 Managing 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 Managing 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 Managing 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
Managing 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
Managing 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 Managing 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 Managing 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 Managing General Partner) by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
31
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
Managing General Partner) not contained in this Offer to Purchase or in the
Assignment of Partnership Interest and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Purchaser (which is an affiliate of the Managing General Partner),
IPLP, IPT and Insignia have filed with the Commission a Tender Offer Statement
on Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same places and in
the same manner as set forth in Section 9 (except that they will not be
available at the regional offices of the Commission).
XXXXXX RIVER PROPERTIES, L.L.C.
AUGUST 27, 1998
32
SCHEDULE I
TRANSACTIONS IN THE UNITS
EFFECTED BY IPLP IN THE PAST 60 DAYS
Number of Price
DATE Units Purchased Per Unit
------- --------------- --------
8/17/98 10.00 $300.00
8/17/98 5.00 322.00
8/17/98 2.00 300.00
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
375 Park Avenue July 1998. For additional information regarding Xx. Xxxxx, see Schedule III.
Suite 3401
New York, NY 10152
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx has been a Manager of the Purchaser since July 1998. For
000 Xxxx Xxxxxx additional information regarding Xx. Xxxxxxx, see Schedule IV.
New York, NY 10166
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has been a Manager of the Purchaser since its inception in July
1998. For additional information regarding Xx. Xxxxxx, see Schedules 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 and as Chairman
000 Xxxx Xxxxxx of the Board of Trustees and Chief Executive Officer of IPT since
Suite 3401 December 1996. For additional information regarding Xx. Xxxxxx,
New York, NY 10152 see Schedule IV.
Xxxxx X. Xxxxx* Xxxxx X. Xxxxx has served as a Trustee of IPT since its inception
in May 1996, and has served as President and Director of IPT since
December 1996. For additional information regarding Xx. Xxxxx, see
Schedule IV.
Xxxxx X. Xxxxxxxx* Xxxxx X. Xxxxxxxx has served as a Trustee of IPT since December
102 Woodmont Boulevard 1996. Xx. Xxxxxxxx has also served as an Executive Managing
Suite 400 Director of IPT since December 1996. For additional information
Nashville, TN 37205 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 has served as Secretary of IPT since
Suite 3401 January 1998. From June until August 1997, Xx. Xxxxx served as
New York, NY 10152 a Vice President of IPT. Since April 1997, Xx. Xxxxx'x principal
occupation has been to serve as a Senior Vice President
-Investment Banking of Insignia. Prior to April 1997, Xx. Xxxxx'x
principal occupation was as an attorney with the law firm of
Xxxxxx & Xxxxx, New York, New York.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as the Controller of IPT since August
1997. Since April 1995, Mr. Xxxxx' principal occupation has been
to serve as an accountant with Insignia. Prior to April 1995, Mr.
Xxxxx' principal occupation was as a senior auditor with the
accounting firm of Ernst & Young LLP.
Xxxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxxx, Xx. has served as a Senior Vice President of
IPT since August 1997, and served as Vice President and Director
of Operations of IPT from December 1996 until August 1997.
Xx. Xxxxxxx'x principal employment has been with Insignia for
more than the past five years. From January 1994 to September
1997, Xx. Xxxxxxx served as Managing Director-- Partnership
Administration of Insignia.
S-3
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has served as Vice President and Treasurer of IPT
since December 1996. Xx. Xxxxxx served as a Vice President of IPT
from December 1996 until August 1997 and as Chief Financial
Officer of IPT from May 1996 until December 1996. For additional
information regarding Xx. Xxxxxx, see Schedule 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 of Insignia since its inception
000 Xxxx Xxxxxx in July 1990. Xx. Xxxxxx has been Chairman and Chief Executive
Suite 3401 Officer of Insignia since January 1991 and President since May
New York, NY 10152 1995. Xx. Xxxxxx has also been President of Metropolitan Asset
Group, Ltd. ("MAG"), a real estate investment banking firm, since
1983.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of Insignia since May 1996. For
0000 Xxxxx Xxxxxx Xxxxx more than the past five years, Xx. Xxxxxxx'x principal occupation has
Santa Fe, NM 87501 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
New York, NY 10021 of Alexander's Inc., a real estate company. He also serves as a director
of Refac Technology Development Corporation, Noodle Kiddoodle, and
Containerways International Ltd.
Xxxxxx X. Xxxx* Xxxxxx X. Xxxx has been a Director of Insignia since August 1993.
000 Xxxx 00xx Xxxxxx Since February 1996, Xx. Xxxx has been a partner in the law firm of
New York, NY 10019 Akin, Gump, Xxxxxxx, Xxxxx & Xxxx, which represents Insignia and
certain of its affiliates from time to time. From January 1991 to
February 1996, Xx. Xxxx was a partner in the law firm LeBoeuf, Lamb,
Xxxxxx & XxxXxx.
Xxxxxxx X. Xxxxxxxx* Xxxxxxx X. Xxxxxxxx has been a Director of Insignia since August 1993.
000 Xxxx 00xx Xxxxxx For more than the past five years, Xx. Xxxxxxxx'x principal occupation
New York, NY 10022 has been as a self-employed consultant in the real estate business,
including ownership, management and lending.
Xxxxx X. Aston Xxxxx X. Aston's principal employment has been with Insignia for more
than the past five years. Xx. Xxxxx currently serves as Chief Financial
Officer of Insignia (since August 1996), with the Office of the Chairman
(since July 1994) and Executive Managing Director of Investment
Banking of Insignia (since January 1991).
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx'x principal employment has been with Realty One, Inc.,
0000 Xxxxxxxx Xxxxx Xxxx. a wholly-owned subsidiary of Insignia ("Realty One"), for more than the
Cleveland, OH 44131 past five years. Xx. Xxxxx currently serves as Chairman and Chief
Executive Officer of Realty One (since October 1997).
S-5
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxxx X. Xxxxxxx Xx. Xxxxxxx currently serves as a Director and Chief Operating Officer of
0000 Xxxxxxxx Xxxxx Xxxx. Realty One (since October 1997). From 1994 to 1997, Xx. Xxxxxxx was
Cleveland, OH 44131 the President of Realty One. Prior to 1994, Xx. Xxxxxxx was the Chief
Financial Officer and Executive Vice President of Xxxxxxxx, Inc.,
a full service advertising agency.
Xxxx X.X. Xxxxxxxxx Xxxx X.X. Xxxxxxxxx'x principal employment has been with Richard
Berkeley Square House Xxxxx for more than the past five years. Xx. Xxxxxxxxx currently serves
London W1X 6AN as a Managing Director of Insignia for Xxxxxxx Xxxxx (since Insignia's
England acquisition of Xxxxxxx Xxxxx in 1998) and has been a director of Xxxxxxx
Xxxxx since its inception in 1997. Xx. Xxxxxxxxx is a citizen of
the United Kingdom.
Xxxxxx X. Xxxxxx Xxxxxx Xxxxxx has been a Senior Vice President -- Human Resources of
Insignia since August 1997. Prior to August 1997, Xx. Xxxxxx'x
principal employment for more than the prior five years was as
Director -- Human Resources of E&Y Xxxxxxx Xxxxxxxxx Real Estate
Group, New York, New York.
Xxxx X. Xxxxxxxx Xxxx X. Xxxxxxxx'x principal employment has been with Xxxxxxx Xxxxx for
Berkeley Square House more than the past five years. Xx. Xxxxxxxx currently serves as Chief
London W1X 6AN Executive Officer of Xxxxxxx Xxxxx (since Insignia's acquisition of Xxxxxxx
Xxxxxxx Xxxxx in 1998). Xx. Xxxxxxxx is a citizen of the United Kingdom.
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx'x principal employment has been with Insignia for
000 Xxxxxxxx Xxxxxxxxx more than the past five years. Xx. Xxxxxxxx currently serves as an
Suite 400 Executive Managing Director of Insignia (since July 1994) and as
Nashville, TN 37205 President of Insignia Financial Services, a division of Insignia (since July
1994).
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx has been General Counsel and Secretary of Insignia
000 Xxxx Xxxxxx since March 1998. Prior to that time, Xx. Xxxxxxx'x principal occupation
New York, NY 10166 was as a partner with the law firm of Nixon, Hargrave, Devans & Xxxxx,
LLP, New York, New York.
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx'x principal employment has been with Insignia for
000 Xxxx Xxxxxx more than the past five years. Xx. Xxxxxxxx currently serves as a
New York, NY 10166 Managing Director -- Investment Banking of Insignia (since July 1994).
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx has been with the Office of the Chairman of Insignia
000 Xxxx Xxxxxx and has been Chairman of Insignia/ESG, Inc. since July 1996. Prior to
New York, NY 10166 July 1996, Xx. Xxxxxx'x principal employment for more than the prior
five years was as a founder and Chairman of Xxxxxx X. Xxxxxx
Company, Incorporated ("ESG"), a commercial property management
and brokerage firm located in New York, New York that was acquired
by Insignia in June 1996.
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx'x principal employment has been with Insignia for
more than the past five years. Xx. Xxxxxxx currently serves as a
Senior Vice President of Insignia (since July 1994) and as Chief
Information Officer of Insignia (since January 1991).
S-6
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X.X. Xxxxxxx Xxxxxx Xxxxxxx'x principal employment has been with Xxxxxxx Xxxxx
Berkeley Square House Group Limited, a wholly-owned U.K. subsidiary of Insignia ("Xxxxxxx
Xxxxxx W1X 6AN Xxxxx"), for more than the past five years. Xx. Xxxxxxx currently serves
England as Chairman of Xxxxxxx Xxxxx (since Insignia's acquisition of Xxxxxxx Xxxxx
in 1998). Xx. Xxxxxxx is a citizen of the United Kingdom.
Xxxx Xxxxxxx Xxxx Xxxxxxx has been an Executive Managing Director of Insignia since
909 Third Avenue September 1995 and President of Insignia Residential Group since
New York, NY 10022 September 1997. Xx. Xxxxxxx has also served as President of Insignia
Management Services -- New York, Inc., a subsidiary of Insignia,
since September 1995. Prior to September 1995, Xx. Xxxxxxx'x
principal occupation was to serve as President and Chief Executive
Officer of Xxxxxxx Company, Inc., a residential property
management firm located in New York, New York which Insignia
acquired in September 1995.
Xxxxxx Xxxx Xxxxxx Xxxx has been a Senior Vice President -- Finance of Insignia
since January 1997 and Controller of Insignia since June 1994.
Prior to June 1994, Xx. Xxxx was Senior Vice President and
Controller of The First Savings Bank, FSB located in Greenville,
South Carolina.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx'x principal employment has been with Insignia for
more than the past five years. Xx. Xxxxxx currently serves as
Chief Operating Officer of Insignia Residential Group (since
January 1997).
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has been a Managing Director of Insignia since
000 Xxxx Xxxxxx June 1996, President of Insignia Commercial Group since January 1997
New York, NY 10166 and President of Insignia/ESG, Inc. since June 1996. From February
1992 until July 1996, Xx. Xxxxxx'x principal employment was as President
of ESG. Xx. Xxxxxx currently serves as a Director of Liberty Property
Trust and Tower Realty, Inc.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx'x principal employment has been with Insignia for more
than the past five years. Xx. Xxxxxx currently serves as Chief
Operating Officer (since August 1996) and Treasurer (since January
1992) of Insignia. Xx. Xxxxxx has also served as the Chief
Financial Officer and Controller of MAG since September 1990.
S-7
SCHEDULE V
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Johnstown/Consolidated Income Partners
Multi-Benefit Realty Fund 87-1
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Growth Fund XXII
Fox Strategic Housing Income Partners
Davidson Growth Plus, X.X.
Xxxxxxxx Diversified Real Estate II, X.X.
Xxxxxxxx Income Real Estate, L.P.
HCW Pension Real Estate Fund
Angeles Income Properties, Ltd. II
Angeles Income Properties, Ltd. IV
Angeles Income Properties, Ltd. 6
Angeles Opportunity Properties, Ltd.
Angeles Partners IX
Angeles Partners XII
S-8
Manually signed facsimile copies of the Assignment of Partnership
Interest will be accepted. The Assignment of Partnership Interest and any other
required documents should be sent or delivered by each Limited Partner or such
Limited Partner's broker, dealer, bank, trust company or other nominee to the
Depositary as set forth below.
The Depositary for the Offer is:
XXXXXX TRUST COMPANY OF NEW YORK
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (000) 000-0000 (212) 701-0000 Xxxx Xxxxxx Plaza
P.O. Box 0000 00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 Xxx Xxxx, Xxx Xxxx 00000
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at its telephone number and address listed below. You may
also contact your broker, dealer, bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
(Toll Free)
(000) 000-0000
(Call Collect)
