Offer to Purchase for Cash
Up to 160,000 Units of Limited Partnership Interest
in
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
for
$95.00 Net Per Unit
by
OLYMPIA INVESTORS, L.P.
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THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON WEDNESDAY, APRIL 8, 1998, UNLESS THE OFFER IS EXTENDED.
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IMPORTANT
Olympia Investors, L.P., a Delaware limited partnership (the "Purchaser"),
is offering to purchase up to 160,000 of the outstanding units of limited
partnership interest ("Units") in Integrated Resources High Equity Partners,
Series 85, a California limited partnership (the "Partnership"), at a purchase
price of $95.00 per Unit (the "Purchase Price"), net to the seller in cash,
without interest, less the amount of distributions per Unit, if any (other than
distributions of Adjusted Cash from Operations, as defined in the Partnership's
partnership agreement ("Partnership Agreement")), made by the Partnership from
the date of this Offer to Purchase (as it may be supplemented or amended from
time to time, the "Offer to Purchase"), until the Payment Date (as defined
below), upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Assignment of Partnership Interest, including the
Instructions thereto, as it may be supplemented or amended from time to time
(the "Assignment of Partnership Interest" which, collectively with the Offer to
Purchase, constitute the "Offer"). As a result of Xxxx X. Xxxxx's relationship
with the Purchaser, he may be deemed to be a "co-bidder" with the Purchaser.
LIMITED PARTNERS WHO TENDER THEIR UNITS WILL NOT BE OBLIGATED TO PAY ANY
COMMISSIONS OR PARTNERSHIP TRANSFER FEES. The 160,000 Units sought pursuant to
the Offer represent approximately 40% of the total Units outstanding as of
September 30, 1997.
The Purchaser is not affiliated with the general partners of the
Partnership. However, the Purchaser has entered into an agreement (the
"Agreement") with Presidio Capital Corp. ("Presidio"), an affiliate of the
Partnership's general partners, pursuant to which, among other things and
subject to the terms and conditions set forth therein: (i) the Purchaser has
granted Presidio the right to purchase 50% of the Units acquired by the
Purchaser pursuant to the Offer and the Purchaser's offers for Units of two
related limited partnerships (the "Related Partnerships"); (ii) either party can
initiate buy/sell procedures pursuant to which the non-initiating party would be
required to elect either to buy certain Units from the initiating party or to
sell certain Units to the initiating party; (iii) the Purchaser and its
affiliates have agreed that, prior to the Standstill Expiration Date (as defined
in Section 12 ("Background of the Offer"), they will not: seek the removal of
the general partners, call any meeting of limited partners or seek to control
the management, policies or affairs of the Partnership or the Related
Partnerships, effect any business combination or other extraordinary transaction
with the Partnership, any Related Partnership or their general partners, acquire
Units other than pursuant to the Offers or acquire properties or assets of the
Partnership or any Related Partnership; (iv) the Purchaser and its affiliates
have agreed, prior to the Standstill Expiration Date, to vote their Units in
favor of a proposal, if any, by the Partnership's general partners that would
result in Limited Partners receiving securities that are listed on NASDAQ or a
national securities exchange; and (v) Presidio has agreed to cause the general
partners of the Partnership and the Related Partnership to cooperate to
facilitate the Offers. Section 12 ("Background of the Offer") contains a more
detailed description of the Agreement.
The Offer is not conditioned upon any minimum number of Units being
tendered. If, as of the Expiration Date (as defined in Section 1 ("Terms of the
Offer; Expiration Date; Proration")), more than 160,000 Units are validly
tendered and not properly withdrawn, the Purchaser will accept for purchase on a
pro rata basis only 160,000 Units, subject to the terms and conditions set forth
herein. See Section 14 ("Conditions of the Offer").
Any (i) limited partner of the Partnership, (ii) beneficial owner, in the
case of Units owned by Individual Retirement Accounts or Xxxxx Plans (a
"Beneficial Owner"), or (iii) person who has purchased Units but has not yet
been reflected on the Partnership's books as a substitute limited partner (an
"Assignee", and collectively with limited partners of the Partnership and
Beneficial Owners, the "Limited Partners") desiring to tender Units should
complete and sign the Assignment of Partnership Interest or a facsimile thereof
in accordance with the Instructions in the Assignment of Partnership Interest
and mail or deliver the signed Assignment of Partnership Interest to the
Depositary (as defined below). A Limited Partner may tender any or all of the
Units owned by that Limited Partner, provided, however, in order for a tender to
be valid, (i) a minimum of 10 Units or, if Units are tendered by an Individual
Retirement Account or a Xxxxx Plan, 4 Units, must be sold pursuant to the Offer
and (ii) to the extent such tender is a partial tender, after the sale of Units
pursuant to the Offer, the Limited Partner must continue to hold at least 10
Units or, if Units are tendered by an Individual Retirement Account or a Xxxxx
Plan, 4 Units (8 Units for an Individual Retirement Account or a Xxxxx Plan for
Missouri and Washington residents) ((i) and (ii) collectively, the "Minimum
Units Requirements"). See Section 3 ("Procedure for Tendering Units").
Limited Partners are urged to consider the following factors:
* The Purchaser is making the Offer with a view to making a profit.
Accordingly, in establishing the Purchase Price, the Purchaser was
motivated to set the lowest price for the Units which might be
acceptable to Limited Partners consistent with the Purchaser's
objectives. Such objectives and motivations may conflict with the
interest of the Limited Partners in receiving the highest price for
their Units. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Purchase
Price and no representation is made by the Purchaser or any
affiliate of the Purchaser as to such fairness.
* The Purchase Price of $95.00 per Unit is approximately 73% of the
Purchaser's estimate of the net asset value per Unit of $130.21 and
approximately 77% of the Purchaser's estimate of liquidation value
per Unit of $124.12. See "Introduction" and Section 13 ("Purchase
Price Considerations").
* If the Purchaser is successful in acquiring a substantial number of
Units pursuant to the Offer, the Purchaser, which is controlled by
Xxxx X. Xxxxx, could, after the Standstill Expiration Date, thereby
be in a position to significantly influence voting decisions with
respect to the Partnership, including, without limitation, decisions
concerning amendments to the Partnership Agreement and removal and
replacement of the Partnership's general partners. This means that,
after the Standstill Expiration Date, (i) those who remain Limited
Partners could be prevented from taking action they desire but that
the Purchaser opposes and (ii) the Purchaser may be able to take
action desired by the Purchaser but opposed by such remaining
Limited Partners. Generally, however, voting decisions, other than
certain decisions concerning the removal and substitution of the
Partnership's general partners, require the consent of the
Partnership's general partners prior to effectuation.
Questions and requests for assistance or for additional copies of the
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent (as defined below) at the address and telephone number set
forth below and on the back cover of the Offer to Purchase. No soliciting dealer
fees or other payments to brokers for tenders are being paid by the Purchaser.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
For More Information or for Further Assistance, Please Call the Information
Agent:
BEACON HILL PARTNERS, INC.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (Collect)
(000) 000-0000 (Toll Free)
TABLE OF CONTENTS
Page
INTRODUCTION...................................................................1
THE OFFER......................................................................5
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION................5
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS..................6
SECTION 3. PROCEDURE FOR TENDERING UNITS.................................6
SECTION 4. WITHDRAWAL RIGHTS.............................................8
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT............9
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS............................9
SECTION 7. EFFECTS OF THE OFFER.........................................11
SECTION 8. FUTURE PLANS OF THE PURCHASER................................12
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP...............13
SECTION 10. INFORMATION CONCERNING THE PURCHASER AND CERTAIN
AFFILIATES OF THE PURCHASER..........................16
SECTION 11. SOURCE OF FUNDS..............................................18
SECTION 12. BACKGROUND OF THE OFFER......................................18
SECTION 13. PURCHASE PRICE CONSIDERATIONS................................19
SECTION 14. CONDITIONS OF THE OFFER......................................22
SECTION 15. CERTAIN LEGAL MATTERS........................................24
SECTION 16. FEES AND EXPENSES............................................25
SCHEDULE I...................................................................I-1
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To the Limited Partners of
Integrated Resources High Equity Partners, Series 85
INTRODUCTION
The Purchaser hereby offers to purchase up to 160,000 Units at a purchase
price of $95.00 per Unit (the "Purchase Price"), net to the seller in cash,
without interest, less the amount of distributions per Unit, if any (other than
distributions of Adjusted Cash from Operations, as defined in the Partnership
Agreement), made by the Partnership from the date of the Offer until the Payment
Date, upon the terms and subject to the conditions set forth in the Offer.
Limited Partners who tender their Units in response to the Offer will not be
obligated to pay any commissions or partnership transfer fees. The Purchaser has
retained Beacon Hill Partners, Inc. to act as Information Agent (the
"Information Agent") and Xxxxxx Trust Company of New York to act as Depositary
(the "Depositary") in connection with the Offer. The Purchaser will pay all
charges and expenses in connection with the services of the Information Agent
and the Depositary. The Offer is not conditioned on any minimum number of Units
being tendered. Subject to the Minimum Units Requirements, a Limited Partner may
tender any or all of the Units owned by that Limited Partner. Notwithstanding
any provision contained in the Offer to Purchase or any related document, under
no circumstances will the Purchaser be required to accept any Units the transfer
of which to the Purchaser would be prohibited by the Partnership Agreement or
any regulation or procedure adopted thereunder.
The Purchaser is not affiliated with the general partners of the
Partnership. However, the Purchaser has entered into an Agreement with Presidio,
pursuant to which, among other things and subject to the terms and conditions
set forth therein: (i) the Purchaser has granted Presidio the right to purchase
50% of the Units acquired by the Purchaser pursuant to the Offer and offers for
Units of the Related Partnerships (collectively, the "Offers"); (ii) either
party can initiate buy/sell procedures pursuant to which the non-initiating
party would be required to elect either to buy certain Units from the initiating
party or to sell certain Units to the initiating party; (iii) the Purchaser and
its affiliates have agreed that, prior to the Standstill Expiration Date, they
will not: seek the removal of the general partners, call any meeting of limited
partners or seek to control the management, policies or affairs of the
Partnership or the Related Partnerships, effect any business combination or
other extraordinary transaction with the Partnership, any Related Partnership or
their general partners, acquire Units other than pursuant to the Offers or
acquire properties or assets of the Partnership or any Related Partnership; (iv)
the Purchaser and its affiliates have agreed, prior to the Standstill Expiration
Date, to vote their Units in favor of a proposal, if any, by the Partnership's
general partners that would result in Limited Partners receiving securities that
are listed on NASDAQ or a national securities exchange; and (v) Xxxxxxxx has
agreed to cause the general partners of the Partnership and the Related
Partnership to cooperate to facilitate the Offers. Section 12 ("Background of
the Offer") contains a more detailed description of the Agreement.
Some Factors To Be Considered By Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following:
* The Purchaser is making the Offer with a view to making a profit.
Accordingly, in establishing the Purchase Price, the Purchaser was
motivated to set the lowest price for the Units which might be
acceptable to Limited Partners consistent with the Purchaser's
objectives. Such objectives and motivations may conflict with the
interest of the Limited Partners in receiving the highest price for
their Units. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Purchase
Price and no representation is made by the Purchaser or any
affiliate of the Purchaser as to such fairness.
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* The Purchase Price of $95.00 per Unit is approximately 73% of the
Purchaser's estimate of the net asset value per Unit of $130.21 and
approximately 77% of the Purchaser's estimate of liquidation value
per Unit of $124.12. See Section 13 ("Purchase Price
Considerations").
* Upon the liquidation of the Partnership, the Purchaser will benefit
to the extent the amount per Unit it receives in the liquidation
exceeds the Purchase Price, if at all. Therefore, Limited Partners
might receive more value if they hold their Units, rather than
tender, and receive proceeds from the liquidation of the
Partnership. Alternatively, Limited Partners may prefer to receive
the Purchase Price now rather than wait for uncertain future net
liquidation proceeds. When the assets of the Partnership are
ultimately sold or otherwise disposed of, the return to Limited
Partners could be higher or lower than the Purchase Price.
* If the Purchaser is successful in acquiring a substantial number of
Units pursuant to the Offer, the Purchaser, which is controlled by
Mr. Xxxxx, could, after the Standstill Expiration Date, thereby be
in a position to significantly influence voting decisions with
respect to the Partnership. This means that, after the Standstill
Expiration Date, (i) those who remain Limited Partners could be
prevented from taking action they desire but that the Purchaser
opposes and (ii) the Purchaser may be able to take action desired by
the Purchaser which may be opposed by, and which may not be in the
best interests of, such remaining Limited Partners. Generally,
however, voting decisions other than certain decisions concerning
the removal and substitution of the Partnership's general partners
require the consent of the Partnership's general partners prior to
effectuation.
* To the extent that a portion of the losses recognized and allocated
to the Limited Partners for tax purposes by the Partnership in prior
years was subject to restrictions on deductions of losses from
passive activities, such losses were generally "suspended" and
carried over by the Limited Partners. Such "suspended" losses may,
depending on a Limited Partner's particular circumstances, be
available to offset all or a portion of any gain recognized by such
Limited Partner on the sale of Units. In the event that a Limited
Partner tenders all of his Units, he would generally be able to
deduct any loss on the sale along with the balance of any
"suspended" passive activity losses from prior years. See Section 6
("Certain Federal Income Tax Matters"). Because the Offer is being
made for less than all of the outstanding Units, there can be no
assurance that a Limited Partner tendering all of his Units will in
fact sell all of such Units pursuant to the Offer.
* Consummation of the Offer may limit the ability of Limited Partners
to dispose of Units during the twelve month period following
completion of the Offer. See Section 7 ("Effects of the Offer").
* Limited Partners may no longer wish to continue with their
investment in the Partnership for a number of reasons, including:
Although not necessarily an indication of value, the $95.00 per
Unit Purchase Price is a premium over the $71.28 per Unit
weighted average selling price for Units reported for the limited
and sporadic secondary market during the six-month period ended
January 31, 1998. See Section 13 ("Purchase Price
Considerations"). Such secondary market selling prices do not
take into account commissions charged by secondary market makers
effectuating such sales and other transaction costs;
-2-
The Offer will provide Limited Partners with an immediate
opportunity to liquidate their investment in the Partnership
without the usual transaction costs associated with market sales
or Partnership transfer fees;
Although there are some limited resale mechanisms available to
Limited Partners wishing to sell their Units, there is no formal
or organized trading market for the Units. The Partnership's Form
10-K for the year ended December 31, 1996 (the "Form 10-K")
states: "Units of the Partnership are not publicly traded. There
are certain restrictions set forth in the Partnership's amended
limited partnership agreement ("Limited Partnership Agreement")
which may limit the ability of a limited partner to transfer
Units. Such restrictions could impair the ability of a limited
partner to liquidate its investment in the event of an emergency
or for any other reason." Accordingly, Limited Partners who
desire resale liquidity may wish to consider the Offer. The Offer
affords a significant number of Limited Partners an opportunity
to dispose of their Units for cash, which alternative otherwise
might not be available to them. However, the Purchase Price is
not intended to represent either the fair market value of a Unit
or the fair market value of the Partnership's assets on a per
Unit basis;
General disenchantment with real estate investments;
General disenchantment with long-term investments in limited
partnerships because of, among other things, their illiquidity
and the inability of Limited Partners to effectuate management
control over the Partnership's affairs through the annual
election of general partners. Limited Partners should note,
however, that they do have the right to remove the general
partners by a majority vote;
The Offer may be attractive to certain Limited Partners who wish
in the future to avoid the expenses, delays and complications in
filing complex income tax returns which result from an ownership
of Units;
The Offer provides Limited Partners with the opportunity to
liquidate their Units and to reinvest the proceeds in other
investments should they desire to do so;
The Purchaser believes that the Units represent an attractive
investment at the Purchase Price. There can be no assurance,
however, that this judgment is correct. Ownership of Units will
remain a speculative investment.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more persons, 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.
Limited Partners should consult with their respective advisors about the
financial, tax, legal and other implications of accepting the Offer. Limited
Partners are urged to read the Offer to Purchase and the related materials
carefully and in their entirety before deciding whether to tender their Units.
The Purchaser. The Purchaser is a Delaware limited partnership, the
general partner of which is Olympia-GP Inc., a Delaware corporation which is
wholly-owned by American Real Estate Holdings, L.P., a
-3-
Delaware limited partnership ("AREH"), and the sole limited partner of which is
AREH. The general partner of AREH is American Property Investors, Inc., a
Delaware corporation which is wholly-owned by Xxxx X. Xxxxx, and the sole
limited partner of AREH is American Real Estate Partners, L.P., a Delaware
limited partnership.
Reasons For The Offer. The Purchaser is making the Offer because it
believes that the Units represent an attractive investment at the price offered.
There can be no assurance, however, that the Purchaser's judgment is correct,
and, as a result, ownership of Units (either by the Purchaser or Limited
Partners who retain their Units) will remain a speculative investment. The
Purchaser is acquiring the Units for investment purposes and has no present
intention to make any effort to change current management or the operations of
the Partnership and has no present plans for any extraordinary transaction
involving the Partnership. See Section 8 ("Future Plans of the Purchaser").
Conditions. The Offer is not conditioned on any minimum number of Units
being tendered. Certain other conditions, however, do apply. See Section 14
("Conditions of the Offer").
Outstanding Units. According to publicly available information, as of
March 15, 1997, there were 400,010 Units issued and outstanding, which were held
by 10,648 Limited Partners. An affiliate of the Purchaser beneficially owns 1,
657 Units. See Section 10 ("Information Concerning the Purchaser and Certain
Affiliates of the Purchaser").
Additional Information. The Partnership is subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended
("Exchange Act"), and in accordance therewith is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Such reports and other information may be inspected
at the public reference facilities maintained by the Commission at Room 0000,
Xxxxxxxxx Xxxxx, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, and are
available for inspection and copying at the regional offices of the Commission
located in Northwestern Atrium Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000 and at 7 World Trade Center, 13th Floor, New York, New
York 10048 and at the Commission's World Wide Website at xxxx://xxx.xxx.xxx.
Copies of such material can also be obtained from the Public Reference Room of
the Commission in Washington, D.C. at prescribed rates.
ALL OF THE INFORMATION WITH RESPECT TO THE PARTNERSHIP CONTAINED IN THE
OFFER TO PURCHASE HAS BEEN DERIVED FROM DOCUMENTS AND REPORTS PUBLICLY FILED BY
THE PARTNERSHIP OR THE APPRAISAL INFORMATION (AS DEFINED IN SECTION 12
("BACKGROUND OF THE OFFER")). ALTHOUGH THE PURCHASER HAS NO INFORMATION THAT ANY
STATEMENTS CONTAINED HEREIN BASED UPON SUCH DOCUMENTS, REPORTS OR APPRAISAL
INFORMATION ARE UNTRUE, THE PURCHASER CANNOT TAKE RESPONSIBILITY FOR THE
ACCURACY OR COMPLETENESS OF THE INFORMATION CONCERNING THE PARTNERSHIP CONTAINED
IN SUCH DOCUMENTS, REPORTS AND APPRAISAL INFORMATION OR FOR ANY FAILURE BY THE
PARTNERSHIP TO DISCLOSE EVENTS WHICH MAY HAVE OCCURRED AND MAY AFFECT THE
SIGNIFICANCE OR ACCURACY OF ANY SUCH INFORMATION BUT WHICH ARE UNKNOWN TO THE
PURCHASER.
-4-
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept (and thereby purchase) up to 160,000 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 ("Withdrawal Rights"). For purposes of the
Offer, the term "Expiration Date" shall mean 12:00 midnight, New York City time,
on Wednesday, April 8, 1998, unless the Purchaser 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 ("Extension of Tender
Period; Termination; Amendment") 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.
If, prior to the Expiration Date, the Purchaser 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, whether or not the Units were tendered prior to the increase in
consideration.
If more than 160,000 Units are validly tendered and not properly withdrawn
on or prior to the Expiration Date, the Purchaser will, upon the terms and
subject to the conditions of the Offer, accept for payment and pay for an
aggregate of 160,000 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 the
Partnership Agreement and any relevant procedures or regulations promulgated by
the Partnership's general partners. If the number of Units validly tendered and
not properly withdrawn on or prior to the Expiration Date is less than or equal
to 160,000 Units, the Purchaser will purchase all Units so tendered and not
properly withdrawn, upon the terms and subject to the conditions of the Offer,
subject to the adjustments referred to in the preceding sentence.
If proration of tendered Units is required, because of the difficulty of
determining the number of Units validly tendered and not withdrawn, the
Purchaser may not be able to announce the final results of such proration until
at least approximately seven business days after the Expiration Date. Subject to
the Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay
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
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 ("Conditions of the Offer"), which sets forth in full the conditions
of the Offer. The Purchaser 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, terminate the Offer and return all tendered Units to
tendering Limited Partners, (ii) waive all 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 (iv) amend the Offer.
The Partnership has provided the Purchaser with a list of Limited Partners
for the purpose of making the Offer, and the Offer to Purchase, the Assignment
of Partnership Interest and, if required, any other relevant materials are being
mailed to the Limited Partners to the extent their names and addresses are on
such list.
-5-
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
Upon the terms and subject to the conditions of the Offer, the Purchaser
will purchase by accepting for payment and will pay for Units validly tendered
and not withdrawn in accordance with the procedures specified in Section 4
("Withdrawal Rights"), as promptly as practicable following the Expiration Date
(such date of payment referred to herein as the "Payment Date"). A tendering
beneficial owner of Units whose Units are owned of record by an Individual
Retirement Account 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 (or facsimile thereof)
(with required medallion signature guarantees, unless waived by the Purchaser in
its sole and absolute discretion) and any other documents required by the
Assignment of Partnership Interest. See Section 3 ("Procedure for Tendering
Units"). 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 will be deemed to have accepted
for payment pursuant to the Offer, and thereby purchased, validly tendered
Units, if, as and when the Purchaser gives verbal or written notice to the
Depositary of the Purchaser's acceptance of those Units for payment pursuant to
the Offer. No tender of Units will be deemed to have been validly made until all
defects and irregularities with respect to such tender have been cured or
waived.
If any tendered Units are not purchased for any reason, the Assignment of
Partnership Interest shall be effective to transfer to the Purchaser only that
number of the Limited Partner's Units as is accepted for payment and thereby
purchased by the Purchaser. 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 ("Conditions of the Offer"), the Depositary may, nevertheless, on
behalf of the Purchaser 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 ("Withdrawal Rights"); 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 reserves the right to transfer or assign, in whole or from
time to time in part, to one or more persons, 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. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest (or facsimile thereof) 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 the Offer to
Purchase, on or prior to the Expiration Date. Subject to the Minimum Units
Requirements, a Limited Partner may tender any or all of the Units owned by that
Limited Partner. No alternative, conditional or contingent tenders will be
accepted.
Signature Requirements. The signature(s) on the Assignment of Partnership
Interest must be medallion guaranteed by a commercial bank, savings bank, credit
union, savings and loan association or trust company having an office, branch or
agency in the United States, a brokerage firm that is a member firm of a
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc., as provided in the Assignment of Partnership
Interest. See Instructions to the Assignment of Partnership Interest.
-6-
In order for a tendering Limited Partner to participate in the Offer, his
Units must be validly tendered and not withdrawn on or prior to the Expiration
Date.
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. By executing an Assignment of Partnership Interest,
a tendering Limited Partner appoints the Purchaser, its general partner and any
designees of the Purchaser as the Limited Partner's true and lawful agents and
attorneys-in-fact and 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 Partners's rights with respect to the Units tendered by the
Limited Partner and accepted for payment by the Purchaser. The Purchaser, its
general partner and the designees of the Purchaser will, as to those Units, be
empowered to exercise all voting and other rights with respect to such Units,
including, without limitation, to assign such power of proxy and/or power-of-
attorney to any person without assigning the related Units with respect to which
the such proxy and power-of-attorney was granted, to deliver such Units and
transfer ownership of such Units on the Partnership books maintained by the
general partners of the Partnership, to become a substituted limited partner and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such Units and as a limited partner of the Partnership, all in
accordance with the terms of the Offer. Each such power of attorney and proxy
shall be considered coupled with an interest in the tendered Units. Such
appointment is subject to and effective upon acceptance for payment of the Units
tendered by the Limited Partner. 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 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 the Assignment of Partnership Interest, a tendering holder of Units
agrees to execute all such documents and take such other actions as shall be
reasonably required to enable the Units tendered to be voted in accordance with
the directions of the Purchaser.
Assignment Of Interest In Future Distributions. By executing an Assignment
of Partnership Interest, a tendering Limited Partner irrevocably assigns to the
Purchaser 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 from and
after the Payment Date in respect of the Units tendered by the Limited Partner
and accepted for payment and thereby purchased by the Purchaser.
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, in its sole
discretion, which determination shall be final and binding on all parties. The
Purchaser 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 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) will be final and binding on
all parties. No tender of Units will be deemed to have been validly made unless
and until all defects and irregularities have been cured or waived. Neither the
Purchaser, the Depositary nor 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.
-7-
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, a tendering Limited Partner must provide the Purchaser with the
Limited Partner's correct taxpayer identification number by completing the
Substitute Form W-9 included in the Assignment of Partnership Interest. See
Section 6 ("Certain Federal Income Tax Matters") and the Instructions to the
Assignment of Partnership Interest.
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 the Limited Partner is not a foreign person. See Section 6
("Certain Federal Income Tax Matters") and the Instructions to the Assignment of
Partnership Interest.
Assignee Status. Any assignee of Units who has not been admitted to the
Partnership as a substitute Limited Partner must provide documentation to the
Depositary which demonstrates, to the satisfaction of the Purchaser, such
person's status as an assignee of a Unit.
A tender of Units pursuant to any of the procedures described above and
the acceptance for payment of such Units will constitute a binding agreement
between the tendering Limited Partner and the Purchaser on the terms set forth
in the Offer.
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 the
Offer to Purchase, may also be withdrawn at any time after May 11, 1998.
For a 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 the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered, the number of Units
to be withdrawn and the name in which the Units are registered, if different
from the person who tendered. In addition, the notice of withdrawal 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
medallion signature guaranties).
If purchase of, or payment for, Units is delayed for any reason or if the
Purchaser is unable to purchase or 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.
Any 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 ("Procedure for Tendering Units") at any
time prior to the Expiration Date.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding on all parties.
Neither the Purchaser, the Depositary nor any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
-8-
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
The Purchaser 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,
any Units, (ii) to terminate the Offer and not accept for payment any Units not
theretofore accepted for payment or paid for, (iii) upon the occurrence of any
of the conditions specified in Section 14 ("Conditions of the Offer"), to delay
the acceptance for payment of, or payment for, any Units not already accepted
for payment or paid for, and (iv) to amend the Offer in any respect (including,
without limitation, by increasing or decreasing the consideration offered, the
number of Units being sought, or both). Notice of any such extension,
termination or amendment will promptly be disseminated 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 scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
If the Purchaser 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 ("Withdrawal Rights"); 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 makes a material change in the terms of the Offer, or if
it waives a material condition to 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 any material change in the terms of an
offer, other than a change in price or a change in percentage of securities
sought or a change in any dealer's soliciting fee, will depend upon the facts
and circumstances, including the materiality of the change. With respect to a
change in price or, subject to certain limitations, a change in the percentage
of securities sought or a change in any dealer's soliciting fee, a minimum of
ten business days from the date of such change is generally required to allow
for adequate dissemination to holders of Units. Accordingly, if prior to the
Expiration Date, the Purchaser increases (other than increases of two percent or
less than the outstanding Units) or decreases the number of Units being sought,
or increases or decreases the consideration offered pursuant to an Offer, and if
such Offer is scheduled to expire at any time earlier than the tenth business
day from the date that notice of such increase or decrease is first published,
sent or given to holders of Units, such Offer will be extended at least until
the expiration of such ten business days. As used in the 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.
The following summary is a general discussion of certain of the federal
income tax consequences of a sale of Units pursuant to the Offer. This summary
is based on the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations thereunder, administrative rulings, practice and
procedures and judicial authority, all as of the date of the Offer. All of the
foregoing are subject to change, and any such change could affect the continuing
accuracy of this summary. This summary does not discuss all aspects of federal
income taxation that may be relevant to a particular Limited Partner in light of
such Limited Partner's specific circumstances or to certain types of Limited
Partners subject to special treatment under the federal income tax laws (for
example, foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor (except as otherwise expressly indicated) does it
describe any aspect of state, local, foreign or other tax laws. Sales of Units
pursuant to the Offer will be taxable transactions for federal income tax
purposes, and also may be taxable transactions under applicable state, local,
foreign and other tax laws.
-9-
LIMITED PARTNERS SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO EACH SUCH LIMITED PARTNER OF SELLING UNITS
PURSUANT TO THE OFFER.
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. The amount of a Limited Partner's adjusted tax
basis in such 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 (that is, the Purchase Price) plus the amount of the Partnership's
liabilities allocable to the Unit (as determined under Code Section 752).
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. That capital gain or loss will be treated as long-term
capital gain or loss if the tendering Limited Partner's holding period for the
Units exceeds 18 months. If the tendering Limited Partner's holding period for
the Units exceeds one year but not more than 18 months, the capital gain or loss
will be treated as mid-term capital gain or loss. Under current law, long-term
and mid-term capital gains of individuals and other non-corporate taxpayers are
taxed at marginal federal income tax rates of 20% and 28%, respectively, whereas
the maximum marginal federal income tax rate for ordinary income of such persons
is 39.6%. Capital losses are deductible only to the extent of capital gains,
except that non-corporate taxpayers may deduct up to $3,000 of capital losses in
excess of the amount of their capital gains against ordinary income. Excess
capital losses generally can be carried forward to succeeding years (a
corporation's carry forward period is five years and a non- corporate taxpayer
can carry forward such losses indefinitely); in addition, 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.
If any portion of the amount realized by a Limited Partner is attributable
to "unrealized receivables" (which includes depreciation recapture) or
"inventory" as defined in Code Section 751, then a portion of the Limited
Partner's gain or loss may be ordinary rather than capital.
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 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.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation generally can deduct "passive activity losses" in any year only to
the extent of the person's passive activity income for that year. Closely held
corporations may not offset such losses against so-called "portfolio" income.
Substantially all post-1986 losses of Limited Partners from the Partnership are
passive activity losses. Limited Partners may have "suspended" passive activity
losses from the Partnership (i.e., post-1986 net taxable losses in excess of
statutorily permitted "phase-in" amounts and which have not been used to offset
income from other passive activities).
If a Limited Partner sells less than all of his Units pursuant to the
Offer, a loss recognized by that Limited Partner 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 plus any other passive
activity income for that year, and a gain recognized by a Limited Partner upon
the sale of Units can be offset by the Limited Partner's current or "suspended"
passive activity losses (if any) from the Partnership and other sources. If, on
the other hand, a Limited Partner sells 100% of his 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
-10-
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 his other income (subject to any other applicable
limitations). A tendering Limited Partner must sell all of his Units to receive
these tax benefits. Because the Offer is being made for less than all of the
outstanding Units, there can be no assurance that a Limited Partner which
tenders all of his Units will in fact sell all of his Units pursuant to the
Offer.
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.
A Limited Partner who tenders Units must file an information statement
with his federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation Section 1.751-1(a)(3). The selling
Limited Partner also must notify the Partnership of the date of the transfer and
the names, addresses and TINs of the transferor and transferee within 30 days of
the date of the transfer (or, if earlier, by January 15 of the following
calendar year).
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, that such Limited Partner is not
a foreign person and the Limited Partner's address. 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.
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
likely result will be a reduction in the number of Limited Partners. In the case
of certain kinds of 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
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.
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 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 expects that, even if it purchases the maximum
number of Units in the Offer, after that purchase, the Units will be held of
record by substantially more than 300 persons.
As a result of the Offer and in the Purchaser's capacity as a Limited
Partner of the Partnership, the Purchaser will participate in any subsequent
distributions to Limited Partners to the extent of the Units purchased pursuant
to the Offer.
-11-
Certain Restrictions On Transfer Of Units. The Partnership Agreement
restricts transfers of Units if, among other things, such transfer would cause a
termination of the Partnership for federal income tax purposes (which
termination would occur when Units representing 50% or more of total Partnership
capital and profits are transferred within a twelve-month period). Consequently,
sales of Units in the secondary market and in private transactions during the
twelve-month period following completion of the Offer may be restricted, and
requests for transfers of Units during such twelve-month period may not be
recognized. The Purchaser does not intend to purchase Units to the extent such
purchase would violate the transfer restrictions set forth in the Partnership
Agreement. See Section 6 ("Certain Federal Income Tax Matters").
SECTION 8. FUTURE PLANS OF THE PURCHASER.
The purpose of the Offer is to enable the Purchaser to acquire a
significant interest in the Partnership for investment purposes based on its
expectation that there may be underlying value in the Partnership's properties.
The Purchaser does not presently intend to make any effort to change current
management or the operation of the Partnership and has no present plans or
intentions for any extraordinary transaction involving the Partnership.
Furthermore, the Purchaser and its affiliates have agreed with Presidio that,
prior to the Standstill Expiration Date, they will not, among other things, seek
the removal of the general partners, seek to control the management, policies or
affairs of the Partnership, or seek to effect any form of business combination
or other extraordinary transaction with the Partnership or its general partners.
The Purchaser and its affiliates have also agreed, prior to the Standstill
Expiration Date, to vote their Units in favor of a proposal, if any, by the
Partnership's general partners that would result in Limited Partners receiving
securities that are listed on NASDAQ or a national securities exchange. See
Section 12 ("Background of the Offer"). However, the Purchaser's plans with
respect to its investment in the Units could change after the Standstill
Expiration Date. If such plans with respect to the Partnership change in the
future, the ability of the Purchaser to influence actions on which Limited
Partners have the right to vote will depend on the response of Limited Partners
to the Offer. If the Purchaser acquires only a few Units pursuant to the Offer,
the Purchaser would not be in a position to influence matters over which Limited
Partners have a right to vote. Conversely, if the maximum number of Units sought
are purchased pursuant to the Offer, the Purchaser would own approximately 40%
of the issued and outstanding Units (or 20% of the issued and outstanding Units
if the call option granted under the Agreement is exercised) and, as a result,
would be in a position, after the Standstill Expiration Date, to exert
significant influence over matters on which Limited Partners have a right to
vote. Under the Partnership Agreement, Limited Partners holding a majority of
the Units are entitled to remove the Partnership's general partners at any time.
However, as stated above, the Purchaser has no present intention of doing so and
is prohibited from doing so under the Agreement prior to the Standstill
Expiration Date. In addition, Limited Partners holding a majority of the Units,
with the concurrence of the Partnership's general partner, are entitled to take
action with respect to a variety of matters, including dissolution of the
Partnership and most types of amendments to the Partnership Agreement, but the
Purchaser has no present intention of doing so.
The purchase of the Units will allow the Purchaser to benefit from any of
the following: (a) any cash distributions from Partnership operations in the
ordinary course of business; (b) any distributions of net proceeds from the sale
of Partnership properties; and (c) any distributions of net proceeds from the
liquidation of the Partnership. Following the completion of the Offer (but
subject to the terms of the Agreement), the Purchaser and/or persons related to
or affiliated with it may acquire additional Units or may sell Units. Any
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable. Any
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. The Purchaser also may in the future (subject to the terms of the
Agreement) consider selling some or all of the Units it acquires pursuant to the
Offer to persons not yet determined. Under the Agreement, Presidio has the right
to purchase 50% of the Units acquired by the Purchaser in the Offer and the
Units are subject to a buy/sell agreement with Presidio. See Section 12
("Background of the Offer").
-12-
Except as set forth herein, the Purchaser does not have any present plans
or proposals which relate to or would result in an extraordinary transaction,
such as a merger, reorganization or liquidation, involving the Partnership; a
sale or transfer of a material amount of the Partnership's assets; any changes
in composition of the Partnership's senior management or personnel or their
compensation; any changes in the Partnership's present capitalization or
dividend policy; or any other material changes in the Partnership's structure or
business.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.
Information contained in this Section 9 concerning the Partnership is
derived from the Partnership's publicly-filed documents and reports. Although
the Purchaser has no information that any statement contained in this Section 9
is untrue, the Purchaser cannot take responsibility for the accuracy or
completeness of any information contained in this Section 9 or any failure by
the Partnership to disclose events which may have occurred and may effect the
significance or accuracy of any such information but which are unknown to the
Purchaser.
The Partnership's Assets and Business. The Partnership is a limited
partnership formed in 1983 under the laws of the State of California. Its
principal executive offices are located at 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, XX
00000. Its telephone number is (000) 000-0000.
The Partnership is engaged in the business of operating and holding for
investment previously acquired income-producing properties, consisting of office
buildings, shopping centers and other commercial and industrial properties.
As of March 15, 1997, the Partnership held interests in six properties
containing an aggregate of 1,012,333 square feet of leasable area.
The following table sets forth certain information regarding the
Partnership's properties as of March 15, 1997. More comprehensive information
concerning such properties is included in the Partnership's Form 10-K for the
year ended December 31, 1996.
-13-
Current Leasable Occupancy as of
Property Name Location Square Footage January 1.
------------------------------ ------------------- ---------------- ----------------
1997 1998
------- -----
Xxxxxxxxx Mall Shopping Center Brooklyn Center, MN 79,242 21%(1) 83%
Southport Shopping Center Fort Lauderdale, FL 143,089 95% 96%
Loch Raven Plaza Towson, MD 150,000 91% 88%
Century Park I(2) Kearny Mesa, CA 200,002 74%(3) 74%
568 Broadway(4) New York, NY 299,000 100% 95%
Seattle Tower(5) Seattle, WA 141,000 96% 92%
---------------
(1) Xxxxxxxxx was 77% leased as of January 1, 1997. Occupancy, however,
was only 21% as of January 1, 1997.
(2) Century Park I is owned by a joint venture comprised of the
Partnership and High Equity Partners L.P. - Series 86 ("HEP-86"), an affiliated
public limited partnership. The Partnership and HEP-86 each have a 50% interest
in the joint venture.
(3) The leasing of 14,705 rentable square feet to HealthSouth/IMC
Healthcare Centers in January 1997 increased the occupancy rate to 81%.
(4) 568 Broadway is owned by a joint venture comprised of the Partnership,
HEP-86 and High Equity Partners L.P. - Series 88 ("HEP-88"), both of which are
affiliated public limited partnerships. The Partnership and HEP-86 each have a
38.925% interest and HEP-88 has a 22.15% interest in the joint venture.
(5) Seattle Tower is owned by a joint venture comprised of the Partnership
and HEP-86. The Partnership and HEP-86 each have a 50% interest in the joint
venture.
-14-
Selected Financial Data. Set forth below is a summary of certain financial
data for the Partnership which has been excerpted from the Partnership's Form
10-K for the year ended December 31, 1996 and Forms 10-Q for the nine month
periods ended September 30, 1997 and September 30, 1996 respectively. 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.
Statement of Operations
For the Nine Months Ended September 30,
1997 1997
---------- ----------
Rental Revenue.......................... $6,926,885 $6,721,339
---------- ----------
Costs and Expenses:
Operating expenses................... 2,629,694 2,537,699
Depreciation and amortization........ 969,805 958,096
Partnership management fee........... 681,129 681,131
Administrative expenses.............. 532,387 375,995
Property management fee.............. 204,378 200,473
---------- ----------
5,017,393 $4,753,394
---------- ----------
Income before interest and other income 1,909,492 1,967,945
Interest income...................... 146,628 92,834
Other income......................... 69,660 52,464
---------- ----------
Net income.............................. $2,125,780 $2,113,243
========== ==========
Net income Attributable to:
Limited partners..................... $2,019,491 $2,007,581
General partners..................... 106,289 105,662
---------- ----------
Net income.............................. $2,125,780 2,113,243
========== ==========
Net income per unit of limited
Partnership interest (400,010 units
outstanding)......................... $5.05 $5.02
========== ==========
-15-
Summary Selected Financial Data
For the Year Ended December 31,
1966 1995 1994 1993 1992
----------- ------------ ---------- ------------ -----------
Revenue $ 8,888,016 $ 7,877,644 $7,994,126 $ 9,508,298 $ 9,015,258
Net Income (Loss) $ 2,134,717 $(18,624,934)(5) $1,442,884(3) $ (7,160,418)(2)$ (11,975,981)(1)
Net Income (Loss)
Per Unit $5.07 $ (44.23)(5) 3.43(3) $ (17.01)(2) $ (20.44)(1)
Distributions Per
Unit (6) $2.40 $2.40 14.39(4) $ 6.25 8.60
Total Assets (7) $39,290,185 $ 37,309,597 856,742,905 863,040,600 $ 73,075,021
----------------------
(1) Net loss for the year ended December 31, 1992 includes a write-down for
impairment on Century Park I, Seattle Tower and 000 Xxxxxxxx of $14,60,1450,
or $34.68 per Unit.
(2) Net loss for the year ended December 31, 1993 includes a write-down for
impairment on Southern National, Century Park I and 000 Xxxxxxxx in the
aggregate amount of $10,050,650, or $23.97 per Unit.
(3) Net income for the year ended December 31, 1994 includes a write-down for
impairment on Southern National of $181,000, or $0.43 per Unit.
(4) Distributions for the year ended December 31, 1994 include a $9.45 per Unit
distribution from the proceeds of the sale of Southern National.
(5) Net loss for the year ended December 31, 1995 including a write-down for
impairment on Century Park I, Seattle Tower, 000 Xxxxxxxx, Xxxx Xxxxx,
Xxxxxxxxx and Xxxxxxxxx in the aggregate amount of $20,469,050, or $48.01
per Unit.
(6) All distributions are in excess of accumulated undistributed net income and,
therefore represent a return of capital to investors on a generally accepted
accounting principles basis. Distributions per Unit for the nine months
ended September 30, 1997 were $2.63.
(7) Total assets as of September 30, 1997 were $40,046,484.
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SECTION 10. INFORMATION CONCERNING THE PURCHASER AND CERTAIN AFFILIATES OF
THE PURCHASER.
The Purchaser is a Delaware limited partnership, the general partner of
which is Olympia-GP, Inc. (the "Olympia General Partner"), a Delaware
corporation which is wholly-owned by American Real Estate Holdings, L.P., a
Delaware limited partnership ("AREH"), and the sole limited partner of which is
AREH. The general partner of AREH is American Property Investors, Inc. ("API"),
a Delaware corporation which is wholly-owned by Xxxx X. Xxxxx, and the sole
limited partner of AREH is American Real Estate Partners, L.P., a Delaware
limited partnership ("AREP").
The address of the principal office of each of the Purchaser, the Olympia
General Partner, AREH and API is 000 Xxxxx Xxxxxxx Xxxx, Xxxxx Xxxxx, Xxx Xxxx
00000. Mr. Icahn's business address is c/o Icahn Associates Corp., 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000.
The Purchaser and the Olympia General Partner were formed in February,
1998 for the purpose of acquiring Units in the Partnership and in the Related
Partnerships. See Section 12 ("Background of the Offer"). XXXX is primarily
engaged in the business of acquiring and managing real estate and activities
related thereto. XXX is engaged in the business of acting as general partner of
AREH and of AREP. Mr. Xxxxx's present principal occupation or employment is set
forth on Schedule I attached hereto and is incorporated herein by reference.
Also set forth on Schedule I and incorporated herein by reference are Mr.
Xxxxx's material occupations, positions, offices or employments during the past
five years, including the principal business and address of any business,
corporation or other organization in which such occupation, position, office or
employment was carried on.
The name, position, citizenship, business address, present principal
occupation or employment, material occupations, positions, offices or
employments during the past five years and the principal business address of any
business corporation or other organization in which such occupation, position,
office or employment was carried on, of each executive officer and director of
the Olympia General Partner and API are set forth on Schedule I attached hereto
and are incorporated herein by reference.
Neither the Purchaser, the Olympia General Partner, AREH, API, Mr. Xxxxx,
nor any executive officer or director of any of the foregoing, has been, during
the past five years, (a) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (b) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or a finding of any violation of such laws.
Except as set forth in this Offer to Purchase, (i) neither the Purchaser,
the Olympia General Partner, AREH, API, Mr. Xxxxx nor, to the best of the
Purchaser's knowledge, any of the persons listed on Schedule I, nor any
affiliate of the foregoing beneficially owns or has a right to acquire any
Units, (ii) neither the Purchaser, the Olympia General Partner, AREH, API, Mr.
Xxxxx nor, to the best of the Purchaser's knowledge, any of the persons listed
on Schedule I, nor any affiliate of the foregoing has effected any transaction
in the Units within the past 60 days, (iii) neither the Purchaser, the Olympia
General Partner, AREH, API, Mr. Xxxxx nor, to the best of the Purchaser's
knowledge, any of the persons listed on Schedule I nor any affiliate of the
foregoing 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, (iv) there have been no transactions or
business relationships which would be required to be disclosed under the rules
and regulations of the Commission between any of the Purchaser, the Olympia
General Partner, AREH, API, Mr. Xxxxx or, to the best of the Purchaser's
knowledge, any of the persons listed on Schedule I, on the one hand, and the
Partnership or its affiliates, on the other hand, and (v) there have been no
contracts, negotiations, or transactions between the Purchaser, the Olympia
General partner, AREH, API, Mr. Xxxxx or, to the best of the Purchaser's
knowledge, any of the persons listed
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on Schedule I, on the one hand, and the Partnership or its affiliates, on the
other hand, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets.
XXXX owns two parcels of land in Northridge, California and San Diego,
California, respectively, which it leases to affiliates of the general partners
of the Partnership. Improvements on these properties are owned by such
affiliates and leased by them to third parties. XXXX also owns a one-half
interest in three joint ventures owning certain properties in which one of the
Related Partnerships owns the other one-half interest.
Xxxxxxxx Corp., a Delaware corporation ("Xxxxxxxx"), an affiliate of the
Purchaser, owns an aggregate of 1,657 Units, which represents less than 1% of
the number of Units outstanding, as reported in the Partnership's Form 10-Q for
the quarterly period ended September 30, 1997. Such Units are indirectly
beneficially owned by Mr. Xxxxx. These Units were acquired in auction
transactions through the American Partnership Board more than 60 days prior to
the date of the Offer.
SECTION 11. SOURCE OF FUNDS.
The Purchaser expects that approximately $15,200,000 (exclusive of fees
and expenses) will be required to purchase 160,000 Units, if tendered. The
Purchaser will obtain all of such funds from capital contributions from AREH,
which has an aggregate net worth substantially in excess of the amount required
to purchase such Units. AREH will obtain the funds necessary to make such
capital contributions from its working capital.
SECTION 12. BACKGROUND OF THE OFFER.
On September 11, 1997, Xxxxxxxx sent letters to the general partners of
the Partnership and the Related Partnerships requesting lists of limited
partners of the Partnership and the Related Partnerships for the purpose of
enabling an affiliate to make a tender offer for Units. Xxxxxxxx sent a second
letter requesting limited partner lists to the general partners of the
Partnership and the Related Partnerships on February 13, 1998. The requested
lists were furnished to the Purchaser under the Agreement discussed below on or
about March 9, 1998.
In late October or early November 1997, a representative of XXXX contacted
the managing partner of Northstar Capital Partners ("Northstar"), which
indirectly controls Presidio and the general partners of the Partnership and the
Related Partnerships, to discuss the possibility of conducting a joint tender
offer for Units of the Partnership and the Related Partnerships. Representatives
of AREH met with the managing partner of Northstar on November 3, 1997, but they
were unable to reach agreement on the terms on which a joint tender might be
conducted. Following the November 3 meeting, representatives of AREH, Northstar
and Xxxxxxxx continued to discuss a possible joint tender offer in several
telephone conversations.
Between approximately December 17, 1997 and March 5, 1998, representatives
of AREH, Northstar and Presidio and their counsel attended meetings and/or
participated in telephone conversations in which they negotiated the terms of
the Agreement, a copy of which has been filed as Exhibit (c)(1) to the
Purchaser's Tender Offer Statement on Schedule 14D-1 filed with the Commission
on March 12, 1998. The Agreement provides, among other things, for: (i) the
Purchaser's conduct of tender offers for up to 40% of the outstanding Units of
the Partnership and the Related Partnerships, and the cooperation of the general
partners of the Partnership and Related Partnerships to facilitate such offers
(including furnishing the Purchaser with limited partner lists for use in
connection with the Offers and taking a neutral stance with respect thereto) and
the transfer of tendered Units to the Purchaser without the imposition of
transfer fees; (ii) an agreement by the Purchaser and its affiliates to limit
their acquisition of Units in the Partnership and the Related Partnerships to
Units acquired in the Offers and to limit their acquisition of assets or
properties of the Partnership or the Related Partnerships to properties or
assets which the general partners or their affiliates have publicly announced
their intention to sell or have hired a broker for such purpose; (iii) an
agreement by the Purchaser and its affiliates not to: seek the removal of the
general partners or call any meeting of limited partners of the Partnership or
the Related Partnerships; make any
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proposal to or seek proxies from limited partners of the Partnership or the
Related Partnerships; or act, either alone on in concert with others, to seek to
control the management, policies or affairs of the Partnership or any Related
Partnership or to effect any business combination or other extraordinary
transaction with the Partnership or its general partners; (iv) an agreement by
the Purchaser and its affiliates to vote Units owned by them in favor of a
proposal, if any, by the general partners of the Partnership or the Related
Partnerships resulting in limited partners receiving securities that are listed
on NASDAQ or a national securities exchange; (v) the Purchaser's grant to
Presidio of a call option to purchase 50% of the Units in the Partnership
acquired in the Offer at a price equal to the lesser of the price paid by the
Purchaser or $110.68 per Unit (except that the limitation of the call price to
$110.68 per Unit will not apply if the Purchase Price is increased to more than
that amount in response to a competing bid), plus 50% of the Purchaser's costs
associated with the Offer; (vi) the grant to Presidio of a similar call option
to purchase 50% of the Units in the Related Partnerships acquired pursuant to
the Offers; (vii) a buy/sell agreement, pursuant to which either party can
initiate buy/sell procedures by notifying the other of a specified price per
Unit (not to exceed the then current net asset value of the Units) and the other
terms and conditions on which the non-initiating party would then be required to
elect (subject to certain exceptions) either to buy certain Units from the
initiating party or to sell certain Units to the initiating party (such Units
consisting, in the case of the Purchaser, of all Units owned by the Purchaser
and its affiliates and, in the case of Northstar, of all Units purchased by
Northstar upon exercise of the call option described above). The agreements of
the Purchaser and its affiliates described in clauses (ii), (iii) and (iv) above
expire on March 6, 2001 (the "Standstill Expiration Date"), but may expire
earlier under certain circumstances. In connection with the negotiation of the
Agreement, Northstar and Presidio furnished the Purchaser with appraisals of
each of the properties of the Partnership and the Related Partnerships prepared
by an independent appraisal firm (the "Appraiser") in August and September 1997
(collectively, the "Appraisal Information"). For a more complete discussion of
the Appraisal Information, see Section 13 ("Purchase Price Considerations").
SECTION 13. PURCHASE PRICE CONSIDERATIONS.
The Purchaser has set the Purchase Price at $95.00 net per Unit (subject
to adjustment as set forth in this Offer to Purchase). The Purchaser established
the Purchase Price by analyzing a number of quantitative and qualitative factors
including: (i) the absence of a significant number of recent reported resales of
the Units; (ii) the lack of liquidity of an investment in the Partnership; (iii)
the costs to the Purchaser associated with acquiring the Units; (iv) the
administrative costs of continuing to own the Partnership's assets through a
publicly registered limited partnership; (v) the possibility that Limited
Partners may realize taxable income in excess of tax distributions from the
Partnership in future years; (vi) the inability of Limited Partners to exercise
effective control over the management of the Partnership through the annual
election of the General Partners; and (vii) estimated transaction costs of
completing the Offer.
The Purchase Price represents the price at which the Purchaser is willing
to purchase Units. No independent person has been retained to evaluate or render
any opinion with respect to the fairness of the Purchase Price and no
representation is made by the Purchaser or any affiliate of the Purchaser as to
such fairness. Limited Partners are urged to consider carefully all of the
information contained herein and consult with their own advisors, tax, financial
or otherwise, in evaluating the terms of the Offer before deciding whether to
tender Units.
The Units are not listed or traded on any exchange or quoted on any NASDAQ
list or system. At present, privately negotiated sales and sales through
intermediaries (e.g., through the trading system operated by The American
Partnership Board, which publishes sales by holders of Units) are the principal
means available to a Limited Partner to liquidate an investment in Units (other
than the Offer). According to The Partnership Spectrum, an independent
third-party industry publication, for the six months ended January 31, 1998, a
total of 5,262 Units traded at per Unit prices between $58.00 and $89.00 with a
weighted average of $71.28 per Unit. Set forth below is a schedule of the
trading activity of Units during the six-months ended January 31, 1998, in
two-month intervals, as reported by The Partnership Spectrum:
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Trading Activity for Six-Month Period Ended January 31, 1998
Period Low/High No. of Units Total Volume
------ -------- ------------ ------------
Traded
------------
August 1, 1997 - Sept. 30, 1997 $58.00/$83.00 1,983 134,427.57
October 1, 1997 - November 30, 1997 $58.00/$81.11 1,201 79,628.80
December 1, 1997 - January 1, 1998 $58.00/$89.00 2,078 161,036.00
------------- ----- -----------
TOTALS: $58.00/$89.00 5,262 $375,092.37
============= ===== ===========
Limited Partners are advised, however, that such gross sales prices reported by
The Partnership Spectrum do not necessarily reflect the net sales proceeds
received by sellers of Units, which typically are reduced by commissions and
other transaction costs to amounts less than the reported prices.
The Purchaser has been informed that, in a letter dated February 3, 1997,
the general partners advised Limited Partners that they estimated net asset
value per Unit to be $89.37. The Purchaser is not aware of a more recent
estimate of net asset value by the general partners. Furthermore, the general
partners have not disclosed the formula used, the assumptions made, or the
underlying valuations relied upon in deriving this estimated net asset value of
each Unit. Different formulas, assumptions, or underlying valuations may result
in higher or lower estimates of net asset value.
The Purchaser has also estimated net asset value per unit, as described
below. However, the Purchaser believes that net asset value is not necessarily
representative of the value of the Units if the Partnership ultimately
liquidates its properties. Property selling costs and expenses (e.g., brokers'
commissions, attorneys' fees, escrow fees, title company costs, rent guarantees,
correction of deferred maintenance, etc.) which could be incurred by the
Partnership in disposing of the properties may significantly reduce the gross
sale proceeds paid to the Partnership and, in turn, the amount of cash available
for distribution to the Limited Partners. Accordingly, the Purchaser has also
estimated liquidation value per Unit, as described below. Finally, Limited
Partners should note that the general partners of the Partnership may seek to
"liquidate" the Partnership by means of an extraordinary transaction that would
not necessarily involve the sale of individual Partnership properties. In a
communication to Limited Partners dated November 6, 1997, the general partners
stated: "The General Partners are actively considering a variety of plans to
enhance to value and liquidity of the Units. These plans include the possible
conversion of the Partnership into an actively traded real estate investment
trust, where the General Partners believe that the trading price should be
greater than the current trading price in the secondary market for the Units."
The Purchaser has no further information regarding the current plans of the
general partners with respect to any such transaction, nor can the Purchaser
predict the price per Unit that Limited Partners could achieve in connection
therewith.
The Purchase Price represents 73% of the Purchaser's estimate of net asset
value per Unit ("NAV Estimate") and 77% of the Purchaser's estimate of
liquidation value per Unit. The Purchaser prepared its NAV Estimate based on a
hypothetical sale of all of the Partnership's properties at their estimated
aggregate value (based upon the Appraisal Information) and the distribution to
the partners of the gross proceeds of that sale, together with the Partnership's
cash and other assets (net of existing liabilities). The Purchaser's NAV
Estimate does not take into account: (i) real estate transaction costs that
would be incurred on a sale of the Partnership's properties, such as brokerage
commissions and other selling and closing expenses; (ii) timing considerations;
or (iii) costs associated with winding up the Partnership.
NAV Estimate. The Purchaser was furnished with the Appraisal Information
in connection with the discussions between the Purchaser, Northstar and Presidio
described in Section 12 ("Background of the Offer"). The Purchaser derived an
estimate of net asset value per Unit by using the Appraiser's conclusions as to
the value
-20-
of each of the Partnership's properties contained in the Appraisal Information
and adjusting such amount to reflect the Partnership's other assets and
liabilities. Specifically, the Purchaser added receivables and cash and cash
equivalents shown on the Partnership's unaudited balance sheet at September 30,
1997 and subtracted accounts payable and accrued expenses, distributions payable
and amounts due to affiliates. After deducting 5% of aggregate net asset value
to account for the general partners' share of Partnership distributions, the
Purchaser derived an NAV Estimate of $52,083,856.00 or $130.21 per Unit.
The paragraphs that follow describe certain matters pertaining to the
Appraisal Information that may be relevant to Limited Partners in making a
judgment as to the reliability of the property values derived by the Appraiser
and any estimate of net asset value based thereon. While the Purchaser has no
reason to believe that any of the Appraisal Information is incorrect, the
Purchaser cannot take responsibility for the accuracy or completeness of the
Appraisal Information (including without limitation the accuracy, completeness
or appropriateness of the underlying assumptions and methodology employed by the
Appraiser) or for any failure of the Partnership to disclose events which may
have occurred and may affect the significance or accuracy of any such
information but which are unknown to the Purchaser.
The description that follows is derived in its entirety from the Appraisal
Information. In connection with its appraisals, the Appraiser indicates that it
generally conducted a physical inspection of the subject property, the interior
of the improvements and the surrounding area, reviewed economic and demographic
trends in the neighborhood and the region and considered the competitive market
in the local area. The Appraiser's reports indicate that, in general, its
valuations were derived by utilizing the Sales Comparison or the Income
Capitalization approaches, depending on the Appraiser's view of which approach
was most appropriate on a property-by-property basis. According to the
Appraiser, the Sales Comparison Approach involves an estimate of value derived
by comparing the subject property with similar, recently sold properties in the
surrounding or competing area. This approach relies on the principle of
substitution, which holds that when a property is replaceable in the market, its
value tends to be set at the cost of acquiring an equally desirable substitute
property, assuming that no costly delay is encountered in making the
substitution. The Income Capitalization Approach derives an estimate of value by
converting the anticipated economic benefits of owning property into a value
estimate through capitalization. This approach is based on the principle of
"anticipation", which holds that investors recognize the relationship between an
asset's income and its value. In order to value the economic benefits of a
property, potential income and expenses must be estimated, and the most
appropriate capitalization method must be selected. The two most common methods
of converting net income into value are direct capitalization and discounted
cash flow analysis. In direct capitalization, net operating income is divided by
an overall rate extracted from market sales to indicate a value. In the
discounted cash flow method, anticipated future net income streams and a
reversionary value are discounted to an estimate of net present value at a
chosen yield rate (internal rate of return).
The cover letters from the Appraiser included in the Appraisal Information
state that the Appraiser's value opinions are qualified by certain assumptions,
limiting conditions, certifications and definitions, which are more particularly
described in its reports. The Appraiser states that, in accordance with an
agreement between the Appraiser and the Partnership, its report is the result of
a limited process in that certain allowable departures from specific guidelines
of the Uniform Standards of Professional Appraisal Practice ("USPAP") were
invoked and the reliability of the value conclusion provided may be impacted to
the degree there is departure from specific guidelines of USPAP.
Liquidation Value. In estimating liquidation value per Unit, the Purchaser
adjusted its NAV Estimate by deducting from that amount a reserve equal to 5% of
the projected property selling prices, which represents the Purchaser's estimate
of the costs of brokerage commissions, title costs, legal fees, real estate
transfer taxes and other disposition expenses (but does not include any estimate
of the costs of conducting a consent solicitation in order to obtain the Limited
Partners' approval for property sales, as may be required by the Partnership
Agreement or of the costs of winding up the Partnership, because of the
difficulty of estimating those amounts). The result of $124.12 per Unit
represents the Purchaser's estimate of the aggregate net liquidating proceeds
-21-
(before provision for the costs described in the parenthetical to the preceding
sentence) that could be realized in an orderly liquidation of the Partnership,
based on the assumptions described above. Northstar has informed the Purchaser
that a former affiliate of the general partners was advised by the Appraiser in
late 1996 that a methodology providing for a 17.5% discount of the Partnership's
pre-liquidation value (in addition to the 5% reserve for liquidation costs taken
by the Purchaser) constituted a reasonable means of determining the total net
liquidation proceeds of the Partnership in connection with a bulk sale of the
Partnership's properties, given the then current state of the real estate
market. The Purchaser cannot take responsibility for the appropriateness of the
methodology described in the preceding sentence.
The Purchaser's analysis of liquidation value 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 values described above
might be realized would take an extended period of time (at least a year and,
quite possibly, significantly longer), during which the Partnership would
continue to be exposed to the risk of fluctuation in asset values because of
changing market conditions and other factors.
Preliminary NAV Estimate. Prior to its receipt of the Appraisal
Information, the Purchaser estimated net asset value on a preliminary basis by
reviewing publicly available financial information relating to the Partnership
for the fiscal year ended December 31, 1996 and the nine months ended September
30, 1997, in order to determine an adjusted net income (reduced by an amount
intended to reflect normal capital expenditures and operating expenses) of
$5,352,384.00, and then capitalized that amount at 10%, which the Purchaser
believes represents an appropriate capitalization rate for a real estate
portfolio such as the Partnership's. The Purchaser then adjusted such amount to
reflect the Partnership's other assets and liabilities and deducted the general
partners' 5% share of Partnership distributions in the manner described above
under "NAV Estimate." As a result of that review process, the Purchaser derived
a preliminary estimate of net asset value of $54,267,754.00, or $135.67 per
Unit. These calculations are based on rough estimates and the values resulting
therefrom may not be indicative of actual values to any extent. It should be
noted that investors may disagree as to the appropriate capitalization rate to
be applied. The utilization of a lower capitalization rate results in a higher
estimate of aggregate value. The Purchaser believes that the NAV Estimate
derived from the Appraisal Information is likely to represent a closer
approximation of net asset value per Unit because the Appraisal Information was
based upon an individual review and analysis of each Partnership property, while
the Purchaser's preliminary estimate was based solely upon publicly available
information regarding the Partnership as a whole, although there can be no
assurance that either estimate is correct.
SECTION 14. CONDITIONS OF THE OFFER.
Notwithstanding any other term of the Offer, the Purchaser 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 expiration of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been obtained.
Furthermore, notwithstanding any other term of the Offer and in addition to the
Purchaser's right to withdraw the Offer at any time before the Expiration Date,
the Purchaser 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 acceptance of such Units for payment or the payment therefor, 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, (ii) imposes or confirms limitations on the ability of
the Purchaser effectively to exercise full rights of ownership of any
-22-
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)
imposes or confirms limitations on the ability of the Purchaser to fully
exercise the voting rights conferred pursuant to its appointment as proxy
in respect of all tendered Units which it accepts for payment, or (iv)
requires divestiture by the Purchaser of any Units (except, in any such
case, as expressly contemplated by the Agreement);
(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 outside the ordinary
course of the Partnership's business or may be materially adverse to the
Partnership, or the Purchaser 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 or 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;
(e) the Partnership's general partners shall not have consented in
writing to, and shall not have taken all other action that the Purchaser
deems necessary, in the Purchaser's judgment, for the admission of the
Purchaser to the Partnership, as of the next quarterly admission date
following the consummation of the Offer, as a substitute Limited Partner
in accordance with the Partnership Agreement and applicable law;
(f) the Partnership's general partners shall not have furnished to the
Purchaser such information as is necessary, in the Purchaser's judgment,
to verify that the persons purporting to transfer Units to the Purchaser
pursuant to the Offer are in fact the owners of such Units as reflected on
the Partnership's books and records;
(g) the Partnership's general partners shall have caused the
Partnership to impose unreasonable transfer, substitution or similar fees,
including, without limitation, those that would otherwise apply to: (i)
the tender of Units by holders pursuant to the Offer, (ii) the transfer of
such Units to the Purchaser or (iii) the admission of the Purchaser as a
substitute Limited Partner in respect of such Units;
(h) there shall have been threatened, instituted or pending any action
or proceeding before any court or governmental agency or other regulatory
or administrative agency or commission or by any other person, challenging
the acquisition of any Units pursuant to the Offer or otherwise directly
or indirectly relating to the Offer, or otherwise, in the judgment of the
Purchaser, adversely affecting the Purchaser or the Partnership or causing
any material diminution of the benefits to be derived by the Purchaser as
a result of the transactions contemplated by the Offer;
-23-
(i) the Partnership shall have (i) issued, or authorized or proposed
the issuance of, any partnership interests of any class, or any securities
convertible into, or rights, warrants or options to acquire, any such
interests or other convertible securities, (ii) issued or authorized or
proposed the issuance of any other securities, in respect of, in lieu of,
or in substitution for, all or any of the presently outstanding Units, or
(iii) declared or paid any distribution, other than in cash, on any of its
partnership interests, or (iv) the Partnership or any of the Partnership's
general partners shall have authorized, proposed or announced its
intention to propose any merger, consolidation or business combination
transaction, acquisition of assets, disposition of assets or material
change in its capitalization, or any comparable event not in the ordinary
course of business;
(j) a tender offer or exchange offer for some or all of the Units is
made or publicly announced or proposed to be made, supplemented or amended
by any person other than the Purchaser; or
(k) the general partners of the Partnership shall have modified, or
taken any step or steps to modify, in any way, the procedures or
regulations applicable to the registration of Units or transfers of Units
on the books and records of the Partnership or the admission of
transferees of Units as Limited Partners.
The foregoing conditions are for the sole benefit of the Purchaser 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 concerning the events described above will be final and binding upon
all parties. If the Purchaser, in its sole discretion, waives the condition
contained in the foregoing paragraph (g), then the Purchaser will, to the extent
of such waiver, pay all applicable fees referred to in such paragraph.
SECTION 15. CERTAIN LEGAL MATTERS.
General. Except as set forth in this Section 15, the Purchaser is not,
based on its review of publicly available filings by the Partnership with the
Commission and other publicly available information regarding the Partnership,
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of Units as contemplated herein, or any
filings, approvals or other actions by or with any domestic or foreign
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of Units by the Purchaser pursuant to the
Offer as contemplated herein. While 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 to elect to terminate the Offer without purchasing Units thereunder.
The Purchaser's obligation to purchase and pay for Units is subject to certain
conditions, including conditions related to the legal matters discussed in this
Section 15.
Antitrust. The Purchaser 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.
State Laws. The Purchaser is not aware of any jurisdiction in which the
making of the Offer is not in
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compliance with applicable law. If the Purchaser 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 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 shall be made on behalf of the Purchaser,
if at all, only by one or more registered brokers or dealers licensed under the
laws of that jurisdiction.
SECTION 16. FEES AND EXPENSES.
Except as set forth in this Section 16, the Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Units pursuant to the Offer. The Purchaser has retained Xxxxxx Trust Company
of New York to act as Depositary and Beacon Hill Partners, Inc. to act as
Information Agent in connection with the Offer. The Purchaser will pay the
Depositary and Information Agent reasonable and customary compensation for their
services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary and Information Agent against
certain liabilities and expenses in connection therewith, including liabilities
under the federal securities laws. The Purchaser will also pay all costs and
expenses of printing and mailing the Offer and its legal fees and expenses.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein 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 has filed with the Commission a Tender Offer Statement on
Schedule 14D-1 (including exhibits), 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 the Introduction of the Offer to
Purchase (except that they will not be available at the regional offices of the
Commission).
OLYMPIA INVESTORS, L.P.
March 12, 1998
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SCHEDULE I
EXECUTIVE OFFICERS AND DIRECTORS OF OLYMPIA-GP INC.
AND AMERICAN PROPERTY INVESTORS, INC.
The name and positions of the executive officers and directors of the
Olympia General Partner, the general partner of the Purchaser, and American
Property Investors, Inc. ("API"), the general partner of the sole stockholder of
the Olympia General Partner. The business address of each such executive officer
and director (other than Messrs. Icahn and Xxxxxx) is 000 Xxxxx Xxxxxxx Xxxx,
Xxxxx Xxxxx, X.X. 10549. The business address of Messrs. Icahn and Xxxxxx is c/o
Icahn Associates Corp., 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Each such executive officer and director is a citizen of the United States of
America.
Name Position
Xxxx X. Xxxxx Director and Chairman of the Board (API)
Xxxxxx X. Xxxxxxxx Director (API)
Xxxxxxx X. Xxxxxxxxxx Director (API)
Xxxx X. Xxxxxxxxx Director (API)
Xxxx X. Xxxxxxxxxx Vice President, Secretary and Treasurer (API);
Treasurer, Secretary and Director (Olympia General
Partner)
Xxxxx X. Xxxxxx Vice President, Assistant Secretary and Director
(Olympia General Partner)
Xxxxxx X.Xxxxxx Vice President (API); Vice President and Director
(Olympia General Partner)
The following sets forth with respect to each executive officer and
director of the Olympia General Partner and API such person's (a) name, (b)
present principal occupation or employment and the name, principal business and
address of any corporation or other organization in which such employment or
occupation is conducted and (c) material occupations, positions, offices or
employments during the last five years, giving the starting and ending dates of
each and the name, principal business and address of any business corporation or
other organization in which such occupation, position, office or employment was
carried on.
XXXX X. XXXXX. Xxxx X. Xxxxx has been Chairman of the Board of
Directors of API since November 15, 1990. Mr. Xxxxx is also President and a
director of Starfire Holding Corporation (formerly Icahn Holding Corporation), a
Delaware corporation ("SHC"), and Chairman of the Board and a director of
various of SHC's subsidiaries, including ACF Industries, Inc., a New Jersey
corporation ("ACF"). SHC is primarily engaged in the business of holding, either
directly or through subsidiaries, a majority of the common stock of ACF and its
address is 000 Xxxxx Xxxxxxx Xxxx, Xxxxx Xxxxx, Xxx Xxxx 00000. Mr. Xxxxx has
also been Chairman of the Board of Directors of ACF since October 29, 1984 and a
director of ACF since June 29, 1984. ACF is a railroad freight and tank car
leasing, sales and manufacturing company. He has also been Chairman of the Board
of Directors and President of Icahn & Company, Inc. since 1968. Icahn & Company,
Inc. is a registered broker-dealer and a member of the National Association of
Securities Dealers. In 1979, Mr. Xxxxx acquired control and presently serves as
Chairman of the Board of Directors of Bayswater Realty & Capital Corp., which is
a real estate investment and development company ("Bayswater"). ACF, Icahn &
Company, Inc. and Bayswater are deemed to be directly or indirectly owned and
controlled by Mr. Xxxxx. Mr. Xxxxx was Chief Executive Officer and member of the
Office of the Chairman of Trans World Airlines, Inc. ("TWA") from November 8,
1988 to January 8, 1993; Chairman of the Board of Directors of TWA from January
3, 1986 to January 8, 1993; and a director of TWA from September 27, 1985 to
January 8, 1993. Mr. Xxxxx also has substantial equity interests in and controls
various partnerships and corporations which invest in publicly traded
securities.
XXXXXX X. XXXXXXXX. Xxxxxx X. Xxxxxxxx has served as a director of API
since November 15, 1990. He was also Vice Chairman of the Board of Directors of
TWA from February 1, 1989 to January 8, 1993 and a member of the Office of the
Chairman from November 8, 1988 to January 8, 1993. Xx. Xxxxxxxx
I-1
was a director of TWA from September 27, 1985 to January 8, 1993. He also was a
director and executive officer and Director of Research at Icahn & Co., Inc. and
related entities from 1968 until December 1994. He also has been Vice Chairman
of the Board of Directors of ACF since October 29, 1984 and a Director of ACF
since June 29, 1984. Xx. Xxxxxxxx has also been a Senior Managing Director of
Greenway Partners, L.P. since May 1993, which invests in publicly traded
securities.
XXXXXXX X. XXXXXXXXXX. Xxxxxxx X. Xxxxxxxxxx has served as a director
of API since March 26, 1991. Since April 1995, Xx. Xxxxxxxxxx has acted as an
independent real estate investment banker. From January 1, 1994 through April
1995, Xx. Xxxxxxxxxx was Managing Director of RFG Financial, Inc., a commercial
mortgage company. From September 30, 1991 to December 31, 1993, Xx. Xxxxxxxxxx
was Senior Vice President of Xxxxxxxx Asset Management Group. From May 1, 1990
to September 30, 1991, Xx. Xxxxxxxxxx was Senior Vice President of Xxxx
Associates, Inc., a real estate development company, where he was involved in
the acquisition of real estate and the asset management workout and disposition
of business areas. He also acted as the Northeast Regional Director for Xxxx
Associates, Inc. From June 1985 to January 30, 1990, Xx. Xxxxxxxxxx was Senior
Vice President and stockholder of Eastdil Realty, Inc., a real estate company,
where he was involved in the asset management workout, disposition of business
and financing areas. During the interim period form January 30, 1990 through May
1, 1990, Xx. Xxxxxxxxxx was an independent contractor for Eastdil Realty, Inc.
on real estate matters.
XXXX X. XXXXXXXXX. Xxxx X. Xxxxxxxxx has served as a director of API
since December 3, 1993. Xx. Xxxxxxxxx is an attorney and a member of the New
York State Bar and has been with the New York based law firm of Xxxxxxxxx,
Xxxxxxxxx & Xxxx since 1966, where he is currently a senior partner.
XXXX X. XXXXXXXXXX. Xxxx X. Xxxxxxxxxx has served as a director,
Secretary and Treasurer of the Olympia General Partner since February 1998. He
has also served as Vice President, Secretary and Treasurer of API since March
18, 1991. Xx. Xxxxxxxxxx was also President of Bayswater Realty Brokerage Corp.
from June 1987 until November 19, 1993 and Vice President of Bayswater Realty &
Capital Corp. from September 1979 until April 15, 1993.
XXXXX X. XXXXXX. Xx. Xxxxxx has served as a director, Vice President
and Assistant Secretary of the Olympia General Partner since February 1998. He
has also served as Vice President and Controller of API since March 18, 1991.
From January 1988 to May 1991, he was a Vice President API, a provider of
financial services. From 1981 through 1987 he was a controller at Interstate
Properties, a commercial real estate developer/operator.
XXXXXX X. XXXXXX. Xx. Xxxxxx has served as a director and Vice
President of the Olympia General Partner since February 1998. He has also served
as Vice President of API since March 18, 1991. From January 1986 to January 1991
he was a vice president at Integrated Resources, Inc.
I-2
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:
Wall Street Station
P.O. Box 1023
New York, New York 10268-1023
BY HAND/OVERNIGHT DELIVERY:
Receive Window
Wall Street Plaza
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
CONFIRM BY TELEPHONE:
(000) 000-0000
Questions and requests for assistance or for additional copies of the
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
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (Collect)
or
(000) 000-0000 (Toll Free)
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