Offer to Purchase for Cash
Up to 50,000 Units of Limited Partnership Interest
in
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES,
a California limited partnership
for
$415 Net Per Unit
by
XXXXXX RIVER PROPERTIES, L.L.C.
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THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME, ON AUGUST 26,
1998, UNLESS THE OFFER IS EXTENDED.
-------------------------------------------------------------------------------
IMPORTANT
Xxxxxx River Properties, L.L.C., a Delaware limited liability company
(the "Purchaser"), is offering to purchase up to 50,000 of the outstanding
units of limited partnership interest ("Units") in Consolidated Capital
Institutional Properties, a California limited partnership (the "Partnership"),
at a purchase price of $415 per Unit (the "Purchase Price"), net to the seller
in cash, without interest, upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Assignment of Partnership
Interest (which, together with any supplements or amendments, collectively
constitute the "Offer"). The Purchase Price is subject to adjustment under
certain circumstances, as described herein. Holders of Units (each, a "Limited
Partner") who tender their Units in response to the Offer will not be obligated
to pay any commissions or partnership transfer fees. The Purchaser is an
affiliate of ConCap Equities, Inc., which is the general partner of the
Partnership (the "General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of and
controlled by Insignia Properties Trust ("IPT"), which is
controlled by Insignia Financial Group, Inc. ("Insignia"). IPT,
through its operating partnership Insignia Properties, L.P.
("IPLP"), currently owns 79,350 Units (including 28,833 Units,
which were originally acquired by an affiliate of the General
Partner and Insignia, at a purchase price of $400 per Unit
pursuant to a tender offer commenced in October 1997).
o The net asset value per Unit most recently estimated by the
General Partner was $619 as of June 30, 1998, and the net
liquidation value per Unit (the "Estimated Liquidation Value")
estimated by the Purchaser (which is an affiliate of the General
Partner) in connection with the Offer is $613.35 The Purchaser
does not believe, however, that either the General Partner's net
asset value estimate or the Estimated Liquidation Value
represents a fair estimate of the market value of a Unit,
primarily due to the fact that such estimates do not take into
account timing considerations, market uncertainties and legal and
other expenses that would be incurred in connection with a
liquidation of the Partnership. See Section 13. Accordingly, the
Purchaser does not believe that such estimates should be viewed
as representative of the amount a Limited Partner can
realistically expect to obtain on a sale of a Unit in the near
term.
o The Purchaser will have the right to vote all Units acquired
pursuant to the Offer. If the Purchaser (which is an affiliate of
the General Partner) is successful in acquiring more than 20,176
Units, IPT will own in excess of 50% of the total Units
outstanding and, accordingly, will be able to control the outcome
of all voting decisions with respect to the Partnership,
including decisions regarding liquidation, amendments to the
Limited Partnership Agreement, removal and replacement of the
General Partner and mergers, consolidations and other
extraordinary transactions. Even if the Purchaser acquires a
lesser number of Units pursuant to the Offer, however, because
IPT already owns (through IPLP) approximately 40% of the
outstanding Units it will be able to significantly influence the
outcome of all voting decisions with respect to the Partnership.
o The Purchaser (which is an affiliate of the General Partner) is
making the Offer with a view to making a profit. Accordingly,
there is a conflict between the desire of the Purchaser (which is
an affiliate of the General Partner) to purchase Units at a low
price and the desire of the Limited Partners to sell their Units
at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Units should complete and sign
the Assignment of Partnership Interest in accordance with the Instructions to
the Assignment of Partnership Interest and mail or deliver the signed
Assignment of Partnership Interest to the Depositary. A Limited Partner may
tender any or all of the Units owned by that Limited Partner; provided,
however, that because of restrictions in the Partnership's Limited Partnership
Agreement, a partial tender of Units must be for a minimum of five Units (other
than Limited Partners who hold Units in an Individual Retirement Account or
Xxxxx Plan). Tenders of fractional Units will not be permitted, except by a
Limited Partner who is tendering all of the Units owned by that Limited
Partner.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at the address and telephone numbers set forth below and
on the back cover of this Offer to Purchase. No soliciting dealer fees or other
payments to brokers for tenders are being paid by the Purchaser (which is an
affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(800) 854-9486
July 30, 1998
TABLE OF CONTENTS
PAGE
INTRODUCTION............................................................... 1
The Purchaser; Affiliation with the General Partner.................... 1
Some Factors to Be Considered by Limited Partners...................... 1
Reasons for and Effects of the Offer................................... 3
Certain Tax Considerations............................................. 3
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties;
Alternatives....................................................... 4
Conditions............................................................. 5
Distributions.......................................................... 5
Outstanding Units...................................................... 5
THE OFFER.................................................................. 6
Section 1. Terms of the Offer; Expiration Date; Proration............. 6
Section 2. Acceptance for Payment and Payment for Units............... 7
Section 3. Procedure for Tendering Units.............................. 7
Valid Tender....................................................... 7
Signature Requirements............................................. 7
Delivery of Assignment of Partnership Interest..................... 8
Appointment as Proxy; Power of Attorney............................ 8
Assignment of Interest in Future Distributions..................... 8
Determination of Validity; Rejection of Units; Waiver of Defects;
No Obligation to Give Notice of Defects........................ 9
Backup Federal Income Tax Withholding.............................. 9
FIRPTA Withholding................................................. 9
Binding Obligation................................................. 9
Section 4. Withdrawal Rights.......................................... 9
Section 5. Extension of Tender Period; Termination; Amendment......... 10
Section 6. Certain Federal Income Tax Matters......................... 10
General............................................................ 10
Gain or Loss Generally............................................. 11
Unrealized Receivables and Certain Inventory....................... 11
Passive Activity Loss Limitation................................... 11
Partnership Termination............................................ 12
Backup Withholding and FIRPTA Withholding.......................... 12
Section 7. Effects of the Offer....................................... 13
Limitations on Resales............................................. 13
Effect on Trading Market; Registration Under Section 12(g)
of the Exchange Act............................................ 13
Control of Limited Partner Voting Decisions by Purchaser; Effect
of Relationship with General Partner.......................... 13
Section 8. Future Plans of Insignia, IPT and the Purchaser............ 14
Section 9. Certain Information Concerning the Partnership and CCEP.... 15
General............................................................ 15
Originally Anticipated Term of Partnership; Alternatives........... 15
General Policy Regarding Sales and Refinancings of Partnership
Properties.................................................... 16
Selected Financial and Property-Related Data....................... 16
Cash Distributions History......................................... 21
Operating Budgets of the Partnership and CCEP...................... 21
Section 10. Conflicts of Interest and Transactions with Affiliates.... 22
Conflicts of Interest with Respect to the Offer.................... 22
Voting by the Purchaser............................................ 22
i
Financing Arrangements............................................. 23
Transactions with Affiliates....................................... 23
Section 11. Certain Information Concerning the Purchaser, IPLP,
IPT and Insignia................................................. 23
The Purchaser...................................................... 23
IPT and IPLP....................................................... 24
Insignia........................................................... 25
Section 12. Source of Funds........................................... 27
Section 13. Background of the Offer................................... 28
Affiliation With the General Partner............................... 28
General Partner's Affiliation with CCEP............................ 28
Previous Tender Offer.............................................. 29
Determination of Purchase Price.................................... 29
Section 14. Conditions of the Offer................................... 37
Section 15. Certain Legal Matters..................................... 38
General............................................................ 38
Antitrust.......................................................... 38
Margin Requirements................................................ 38
Section 16. Fees and Expenses......................................... 39
Section 17. Miscellaneous............................................. 39
SCHEDULE I - Information Regarding the Managers of the Purchaser.......S-1
SCHEDULE II - Information Regarding the Trustees and Executive
Officers of IPT...........................................S-2
SCHEDULE III - Information Regarding the Directors and Executive
Officers of Insignia......................................S-4
SCHEDULE IV - IPT Partnerships..........................................S-7
ii
TO THE LIMITED PARTNERS OF
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
INTRODUCTION
Xxxxxx River Properties, L.L.C. (the "Purchaser"), which is a Delaware
limited liability company and an affiliate of the General Partner (as defined
below), hereby offers to purchase up to 50,000 of the outstanding units of
limited partnership interest ("Units"), representing approximately 25% of the
Units outstanding, in Consolidated Capital Institutional Properties, a
California limited partnership (the "Partnership"), at a purchase price of $415
per Unit (the "Purchase Price"), net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Assignment of Partnership Interest (which, together
with any supplements or amendments, collectively constitute the "Offer"). The
Offer is not conditioned on any aggregate minimum number of Units being
tendered. A Limited Partner may tender any or all of the Units owned by that
Limited Partner; provided, however, that because of restrictions in the
Partnership's Limited Partnership Agreement (the "Limited Partnership
Agreement"), a partial tender of Units must be for a minimum of five Units
(other than Limited Partners who hold Units in an Individual Retirement Account
("IRA") or Xxxxx Plan). Accordingly, any Limited Partner that owns five or
fewer Units (other than Limited Partners who hold Units in an IRA or Xxxxx
Plan) must tender all or none of its Units. Tenders of fractional Units will
not be permitted, except by a Limited Partner who is tendering all of the Units
owned by that Limited Partner. The Purchaser (which is an affiliate of the
General Partner) will pay all charges and expenses of Beacon Hill Partners,
Inc., who will serve as the Purchaser's information agent for the Offer (the
"Information Agent"), and Xxxxxx Trust Company of New York, who will act as
depositary for the Offer (the "Depositary").
The Purchaser; Affiliation with the General Partner. ConCap Equities,
Inc., which is the general partner of the Partnership (the "General Partner"),
is a wholly-owned subsidiary of Insignia Properties Trust, a Maryland real
estate investment trust ("IPT"). The Purchaser is a newly-formed, wholly-owned
subsidiary of Insignia Properties, L.P., a Delaware limited partnership
("IPLP"), which is the operating partnership of IPT. IPT is the sole general
partner of IPLP (owning approximately 66% of the total equity interests in
IPLP), and Insignia Financial Group, Inc., a Delaware corporation ("Insignia"),
is the sole limited partner of IPLP (owning approximately 34% of the total
equity interests in IPLP). Insignia and its affiliates also own approximately
68% of the outstanding common shares of IPT. The Partnership owns (i) an
apartment property and a multiple-use building and (ii) a debt obligation (the
"Loan") owed by Consolidated Capital Equity Partners, L.P., a California
limited partnership ("CCEP"), in respect of amounts previously borrowed from
the Partnership by CCEP and a predecessor partnership of CCEP. The Loan is
secured by mortgages or deeds of trust on real properties owned by CCEP. ConCap
Holdings, Inc., a Texas corporation ("ConCap Holdings"), is the sole general
partner of CCEP and a wholly-owned subsidiary of the General Partner. See
Sections 9 and 13. For more than the past three years, Insignia Residential
Group, L.P. ("IRG") and Insignia Commercial Group, Inc. ("ICG"), which are
affiliates of Insignia and the Purchaser, have provided property management
services to the Partnership and CCEP, and Insignia (directly or through
affiliates) has performed asset management, partnership administration and
investor relations services for the Partnership and CCEP. By reason of these
relationships, the General Partner has conflicts of interest in considering the
Offer. The General Partner has indicated in a Statement on Schedule 14D-9 (the
"Schedule 14D-9") filed with the Securities and Exchange Commission (the
"Commission") that it is remaining neutral and making no recommendation as to
whether Limited Partners should tender their Units in response to the Offer.
LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED
MATERIALS AND THE SCHEDULE 14D-9 CAREFULLY AND IN THEIR ENTIRETY BEFORE
DECIDING WHETHER TO TENDER THEIR UNITS. See Sections 10 and 13.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser, the General Partner and ConCap Holdings (which is
the general partner of CCEP) are affiliates of and controlled by
IPT, which is controlled by Insignia. The General Partner has
conflicts of interest in considering the Offer, including (i) as
a result of the fact that a sale or liquidation of the
Partnership's or CCEP's assets would result in a decrease or
elimination of the
fees paid to the General Partner and/or its affiliates and (ii)
the fact that as a consequence of the Purchaser's ownership of
Units, the Purchaser (which is an affiliate of the General
Partner) may have incentives to seek to maximize the value of its
ownership of Units, which in turn may result in a conflict for
the General Partner in attempting to reconcile the interests of
the Purchaser (which is an affiliate of the General Partner) with
the interests of the other Limited Partners. See Section 10.
o The net asset value per Unit most recently estimated by the
General Partner was $619 as of June 30, 1998, and the net
liquidation value per Unit (the "Estimated Liquidation Value")
estimated by the Purchaser (which is an affiliate of the General
Partner) in connection with the Offer is $613.35 See Section 13
for a discussion of why the Purchaser (which is an affiliate of
the General Partner) believes that such estimates are not
necessarily indicative of the fair market value of a Unit. THE
PURCHASER (WHICH IS AN AFFILIATE OF THE GENERAL PARTNER) MAKES NO
REPRESENTATION AND EXPRESSES NO OPINION AS TO THE FAIRNESS OR
ADEQUACY OF THE PURCHASE PRICE.
o As with any rational investment decision, the Purchaser (which is
an affiliate of the General Partner) is making the Offer with a
view to making a profit. Accordingly, there is a conflict between
the desire of the Purchaser (which is an affiliate of the General
Partner) to purchase Units at a low price and the desire of the
Limited Partners to sell their Units at a high price.
o If the Purchaser is successful in acquiring more than 20,176
Units pursuant to the Offer, IPT (which is an affiliate of the
General Partner) will own in excess of 50% of the total Units
outstanding and, accordingly, will be able to control the outcome
of all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the
Limited Partnership Agreement, removal and replacement of the
General Partner and mergers, consolidations and other
extraordinary transactions. Even if the Purchaser acquires a
lesser number of Units pursuant to the Offer, however, because
IPT already owns (through IPLP) approximately 40% of the
outstanding Units it will be able to significantly influence the
outcome of all voting decisions with respect to the Partnership.
This means that (i) non-tendering Limited Partners could be
prevented from taking action they desire but that IPT (which is
an affiliate of the General Partner) opposes and (ii) IPT (which
is an affiliate of the General Partner) may be able to take
action desired by IPT but opposed by the non-tendering Limited
Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available to
Limited Partners wishing to sell their Units, there is no formal
trading market for Units. At present, Limited Partners may seek
to negotiate private sales or sales through a trading system such
as the American Partnership Board, which publishes sell offers by
Limited Partners in respect of Units. Accordingly, THE OFFER
AFFORDS LIMITED PARTNERS AN OPPORTUNITY TO DISPOSE OF THEIR UNITS
FOR CASH WHICH OTHERWISE MIGHT NOT BE AVAILABLE TO THEM.
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. The Purchase Price is approximately 4%
greater than the highest reported secondary market sales price of
any Unit during the past six months (based on published
information and information provided by the General Partner).
However, reported secondary market sales prices do not take into
account commissions and transfer fees typically payable by a
Limited Partner in connection with a secondary market sale.
Therefore, the actual proceeds received by a Limited Partner who
sells Units in the secondary market are typically significantly
less than the reported sales prices.
o LIMITED PARTNERS WHO SELL UNITS PURSUANT TO THE OFFER WILL NOT BE
CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE FROM 3% TO
10% OF THE SALES PRICE) OR PARTNERSHIP TRANSFER FEES (WHICH ARE
TYPICALLY $100 PER TRANSFER). The Purchaser will pay all transfer
fees imposed by the Partnership in connection with sales of Units
pursuant to the Offer.
2
o Real estate markets in the United States generally have recovered
and experienced an upward trend since the end of the last
recession. That recovery and upward trend might continue. On the
other hand, real estate markets also may be adversely affected by
a variety of factors, including possible fluctuations in interest
rates, economic slowdowns and overbuilding. Accordingly,
ownership of Units continues to be a speculative investment. THE
OFFER MAY PROVIDE LIMITED PARTNERS WITH THE OPPORTUNITY TO
LIQUIDATE THEIR INTERESTS IN THE PARTNERSHIP AND REPLACE THEM
WITH INVESTMENTS THAT ARE LESS SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to avoid
in the future the expenses, delays and complications in filing
personal income tax returns which may be caused by ownership of
Units. In addition, A LIMITED PARTNER WHO SELLS 100% OF ITS UNITS
PURSUANT TO THE OFFER WILL NO LONGER BE SUBJECT TO THE PASSIVE
ACTIVITY LOSS LIMITATION WITH RESPECT TO "SUSPENDED" LOSSES
ATTRIBUTABLE TO THOSE UNITS AND, THEREFORE, WILL BE ABLE TO
UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who have
become disenchanted with real estate investments generally, and
in particular with the perceived illiquidity of investments made
through limited partnerships, because it may afford an immediate
opportunity for those Limited Partners to liquidate their
investments in the Partnership. On the other hand, Limited
Partners who tender their Units will be giving up the opportunity
to participate in any potential future benefits represented by
the ownership of those Units, including, for example, the right
to participate in any future distributions of cash or property,
whether from operations, the proceeds of a sale or refinancing of
one or more of the Partnership's properties or in connection with
any future liquidation of the Partnership. Instead, any such
distributions of cash or property with respect to Units tendered
in the Offer and purchased by the Purchaser will be paid to the
Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Units and has been advised by the General Partner that the General
Partner also expects to make no recommendation. Each Limited Partner must make
its own decision, based on the Limited Partner's particular circumstances, as
to whether to tender Units and, if so, how many Units to tender. Limited
Partners should consult with their respective advisors regarding the financial,
tax, legal and other implications of accepting the Offer. LIMITED PARTNERS ARE
URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. If the
Purchaser (which is an affiliate of the General Partner) is successful in
acquiring more than 20,176 Units pursuant to the Offer, IPT will own in excess
of 50% of the total Units outstanding and, accordingly, will be able to control
the outcome of all votes by Limited Partners. Even if the Purchaser acquires a
lesser number of Units pursuant to the Offer, however, because IPT already owns
(through IPLP) approximately 40% of the outstanding Units it will be able to
significantly influence the outcome of all voting decisions with respect to the
Partnership. See Sections 8, 10 and 13.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Units sold over (under)
such Limited Partner's adjusted tax basis in those Units, which may be taxable
as ordinary income or loss, capital gain or loss or gain from real estate
depreciation recapture. If a Limited Partner has suspended "passive losses"
from the Partnership or other passive activity investments, such Limited
Partner generally may deduct these losses up to the amount of any gain from the
sale. A sale pursuant to the Offer of all of a Limited Partner's Units will
terminate his or her investment in the Partnership and, commencing with the
year following the year of sale, the Limited Partner will no longer receive
Partnership tax information or have to report the complicated tax information
currently required of Limited Partners. See Section 6.
3
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives. The
Partnership was formed for the purpose of making loans to a predecessor
partnership of CCEP. CCEP's indebtedness in respect of the loans made to it and
its predecessor partnership by the Partnership now is represented by the Loan.
The Loan is secured by deeds of trust or mortgages on apartment complexes and
office buildings owned by CCEP (each, a "CCEP Property" and collectively, the
"CCEP Properties"). The non-recourse provisions of the Loan mean that CCEP's
obligation to repay the Loan is secured only by the value of the collateral
(that is, the CCEP Properties), and the Partnership has no right to make
further claims against CCEP other than to the extent of the value of those
properties. According to the Partnership's Prospectus dated April 26, 1982,
Consolidated Capital Equity Partners ("ConCap Partners") (CCEP's predecessor in
interest) anticipated that it would sell and/or refinance its properties, and
consequently repay the Loan, ten years after their acquisition, depending upon
the then current real estate and money markets, economic climate and income tax
consequences to the partners of ConCap Partners. The reorganization of ConCap
Partners and its subsequent conversion into CCEP in 1990 resulted in a de facto
extension of the originally anticipated ten-year time period.
See Sections 9 and 13.
The Loan is scheduled to mature, and will be repayable in full, in
November 2000. Because the outstanding principal amount of the Loan, including
accrued unpaid interest, exceeds the General Partner's estimate of the fair
market value of the CCEP Properties that secure the Loan by a very large
margin, the General Partner expects that at maturity either (i) the Partnership
will foreclose on or otherwise acquire outright ownership of the CCEP
Properties or (ii) the maturity of the Loan will be extended to a later date.
The General Partner, as a result of its affiliation with ConCap Holdings (which
is the general partner of CCEP), will have several conflicts of interest in
deciding which of these approaches is appropriate. See Section 13.
In general, the General Partner and ConCap Holdings (which is an
affiliate of the General Partner) regularly evaluate the assets of the
Partnership and CCEP, respectively, by considering various factors, such as the
financial position of the Partnership and CCEP and real estate and capital
markets conditions. In this process, the General Partner and ConCap Holdings
monitor each property's specific locale and sub-market conditions, evaluating
current trends, competition, new construction and economic changes. The General
Partner and ConCap Holdings oversee each asset's operating performance and
continuously evaluate the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the General Partner or ConCap
Holdings to sell, obtain financing on, refinance, upgrade with capital
improvements or hold a particular Partnership property or CCEP Property,
respectively. The Partnership and CCEP could seek to arrange mortgage loans
secured by the CCEP Properties that would have priority over the Loan, and to
use the proceeds of those loans for distributions to the Limited Partners or
other appropriate purposes. The Participating Note Master Loan Agreement, dated
July 23, 1981, by and between the Partnership and ConCap Partners (the
"Original Loan Agreement"), contained a provision (the "CCEP Debt Limit
Provision") to the effect that CCEP was not permitted to incur indebtedness
owed to unaffiliated third parties on the CCEP Properties in an amount that
exceeded 25% of the original aggregate purchase price of the CCEP Properties.
The Limited Partnership Agreement describes the CCEP Debt Limit Provision and
references further information as found in the Original Loan Agreement. The
Amended Loan Agreement, dated November 15, 1990, by and between the Partnership
and ConCap Partners (the "Amended Loan Agreement") which by its terms replaced
the Original Loan Agreement, does not contain the CCEP Debt Limit Provision;
however, the Purchaser has been advised that the General Partner has not
determined whether the CCEP Debt Limit Provision contained in the Original Loan
Agreement continues to apply despite the absence of that provision in the
Amended Loan Agreement. Such a determination is not likely to be made except in
connection with a future proposed financing, if any, and would depend heavily
on the advice received from legal counsel to the Partnership and the General
Partner. In any event, as a matter of law, CCEP would need the consent of the
Partnership in order to incur mortgage indebtedness secured by the CCEP
Properties that would have priority over the deeds of trust securing the Loan.
The Limited Partnership Agreement provides that Limited Partners holding a
majority of the outstanding Units may, with the consent of the General Partner,
approve amendments to the Amended Loan Agreement. The General Partner has
advised the Purchaser that it may in the future, if it deems it necessary or
appropriate under the circumstances, solicit the consent of the Limited
Partners in connection with the incurrence of additional or new mortgage
indebtedness that would be senior in priority to the Loan. Because these plans
are subject to change, there can be no assurance that any consent, if deemed
required, will be sought
4
as described above, that CCEP will seek to obtain financing of the type
described above, or as to the amount or timing of any distribution that might
be made to Limited Partners from the proceeds of any such financing which
determination will be made at the time that such financing is obtained and will
be based on, among other things, the Partnership's working capital requirements
at the time. The Purchaser has been advised that the Partnership is currently
in the process of obtaining financing on the Sterling Apartment Homes and
Commerce Center in Philadelphia, Pennsylvania, and that upon completion of the
financing sometime during the second half of 1998, the General Partner expects
to distribute approximately $105 per Unit to the Limited Partners from the
proceeds of the financing; however, there can be no assurance as to whether the
General Partner will obtain this financing as expected. Based on the above
considerations and except for the potential financing of The Sterling Apartment
Homes and Commerce Center, the General Partner and ConCap Holdings are not
currently contemplating the sale or refinancing of, or obtaining financing on,
any other Partnership properties or the CCEP Properties.
Under the Limited Partnership Agreement the term of the Partnership
will continue until December 31, 2015, unless sooner terminated as provided in
the Limited Partnership Agreement or by law. Limited Partners could, as an
alternative to tendering their Units, take a variety of possible actions,
including voting to liquidate the Partnership or causing the Partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however. See
Section 14.
Distributions. The Partnership has made a cash distribution to Limited
Partners of $8.95 per Unit in 1998 (through July 30), and made distributions of
$9.94 per Unit in 1997 and $85.25 per Unit in 1996. The 1996 distribution was
not made completely out of operating cash flow; rather, that distribution was
made primarily out of the amount of working capital reserves, including the
proceeds from financing obtained on certain of the Partnership's properties and
the CCEP Properties, which exceeded the amount required to be held under the
Limited Partnership Agreement. The Limited Partnership Agreement requires that
the General Partner maintain minimum working capital reserves ($7,261,000 as of
June 30, 1998) equal to 5% of net Invested Capital (as defined in the Limited
Partnership Agreement). In total, original investors in the Partnership have
received distributions of $915.82 in respect of their original $1,000
investment made in 1982 See Section 9. The Partnership is currently generating
positive cash flow from operations, and the Purchaser (which is an affiliate of
the General Partner) believes that the Partnership will continue to generate
positive cash flow from operations, depending upon the real estate, capital
markets and general economic conditions at the time. The General Partner has
advised the Purchaser (which is an affiliate of the General Partner) that the
General Partner expects that, subject to the completion of the financing of The
Sterling Apartment Homes and Commerce Center sometime during the second half of
1998, the Partnership will make a special distribution to Limited Partners of
approximately $105 per Unit from the financing proceeds; however, there can be
no assurance that such distribution will be made or as to the amount or timing
of such distribution. The potential for this and other future distributions was
considered by the Purchaser (which is an affiliate of the General Partner) when
establishing the Purchase Price. Limited Partners who tender their Units in
response to the Offer will retain any distributions made through July 30, 1998,
and will be entitled to receive and retain any subsequent distributions made by
the Partnership prior to the date on which the Purchaser pays for tendered
Units pursuant to the Offer, although any such subsequent distribution will
result in a reduction of the Purchase Price. See Section 1. However, tendering
Limited Partners will not be entitled to receive or retain any distributions in
respect of tendered Units which are made on or after the date on which the
Purchaser pays for such Units pursuant to the Offer, regardless of the fact
that the record date (as opposed to the payment date) for any such distribution
may be a date prior to the date of purchase. See Section 3.
Outstanding Units. According to information supplied by the
Partnership, as of July 1, 1998 there were 199,052 Units issued and
outstanding, which were held of record by 19,175 Limited Partners. IPLP
currently owns 79,350 (representing approximately 40% of the outstanding Units.
5
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 50,000 Units that are validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with the procedures set forth
in Section 4. For purposes of the Offer, the term "Expiration Date" shall mean
12:00 midnight, New York City time, on August 26, 1998, unless the Purchaser
(which is an affiliate of the General Partner) in its sole discretion shall
have extended the period of time for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date on which the
Offer, as extended by the Purchaser, shall expire. See Section 5 for a
description of the Purchaser's right to extend the period of time during which
the Offer is open and to amend or terminate the Offer.
THE PURCHASE PRICE WILL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER UNIT, IF ANY, MADE BY THE PARTNERSHIP TO LIMITED
PARTNERS ON OR AFTER JULY 30, 1998 AND PRIOR TO THE DATE ON WHICH THE PURCHASER
PAYS FOR UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an affiliate
of the General Partner) increases the consideration offered to Limited Partners
pursuant to the Offer, the increased consideration will be paid for all Units
accepted for payment pursuant to the Offer, regardless of whether the Units
were tendered prior to the increase in the consideration offered.
If more than 50,000 Units are validly tendered prior to the Expiration
Date and not properly withdrawn prior to the Expiration Date in accordance with
the procedures specified in Section 4, the Purchaser (which is an affiliate of
the General Partner) will, upon the terms and subject to the conditions of the
Offer, accept for payment and pay for an aggregate of 50,000 of the Units so
tendered, pro rata according to the number of Units validly tendered by each
Limited Partner and not properly withdrawn on or prior to the Expiration Date,
with appropriate adjustments to avoid (i) purchases of fractional Units and
(ii) purchases that would violate Section 5.01 of the Limited Partnership
Agreement (which generally requires that a Limited Partner transfer a minimum
of five Units (other than Limited Partners who hold Units in an IRA or Xxxxx
Plan)). If the number of Units validly tendered and not properly withdrawn on
or prior to the Expiration Date is less than or equal to 50,000 Units, the
Purchaser (which is an affiliate of the General Partner) will purchase all
Units so tendered and not withdrawn, upon the terms and subject to the
conditions of the Offer.
If proration of tendered Units is required, then, subject to the
Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange Act of
1934 (the "Exchange Act") to pay Limited Partners the Purchase Price in respect
of Units tendered or return those Units promptly after the termination or
withdrawal of the Offer, the Purchaser (which is an affiliate of the General
Partner) does not intend to pay for any Units accepted for payment pursuant to
the Offer until the final proration results are known. NOTWITHSTANDING ANY SUCH
DELAY IN PAYMENT, NO INTEREST WILL BE PAID ON THE PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The Purchaser
(which is an affiliate of the General Partner) reserves the right (but in no
event shall be obligated), in its sole discretion, to waive any or all of those
conditions. If, on or prior to the Expiration Date, any or all of the
conditions have not been satisfied or waived, the Purchaser reserves the right
to (i) decline to purchase any of the Units tendered and terminate the Offer,
(ii) waive all of the unsatisfied conditions and, subject to complying with
applicable rules and regulations of the Commission, purchase all Units validly
tendered, (iii) extend the Offer and, subject to the right of Limited Partners
to withdraw Units until the Expiration Date, retain the Units that have been
tendered during the period or periods for which the Offer is extended, and/or
(iv) amend the Offer.
This Offer to Purchase and the related Assignment of Partnership
Interest are being mailed by the Purchaser (which is an affiliate of the
General Partner) to the persons shown by the Partnership's records to have been
Limited Partners or (in the case of Units owned of record by IRAs and qualified
plans) beneficial owners of Units as of July 1, 1998.
6
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Units validly tendered and not withdrawn in
accordance with the procedures specified in Section 4, as promptly as
practicable following the Expiration Date. A tendering beneficial owner of
Units whose Units are held of record in an IRA or other qualified plan will not
receive direct payment of the Purchase Price; rather, payment will be made to
the custodian of such account or plan. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of a properly completed and duly executed Assignment of Partnership
Interest and any other documents required by the Assignment of Partnership
Interest. See Section 3. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of the
General Partner) will be deemed to have accepted for payment pursuant to the
Offer, and thereby purchased, validly tendered Units if, as and when the
Purchaser (which is an affiliate of the General Partner) gives verbal or
written notice to the Depositary of the Purchaser's acceptance of those Units
for payment pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Units accepted for payment pursuant to the Offer will
be made by deposit of the Purchase Price with the Depositary, which will act as
agent for tendering Limited Partners for the purpose of receiving payments from
the Purchaser and transmitting those payments to Limited Partners whose Units
have been accepted for payment.
If any tendered Units are not purchased for any reason, the Assignment
of Partnership Interest with respect to such Units will be destroyed by the
Purchaser (which is an affiliate of the General Partner). If for any reason
acceptance for payment of, or payment for, any Units tendered pursuant to the
Offer is delayed or the Purchaser is unable to accept for payment, purchase or
pay for Units tendered pursuant to the Offer, then, without prejudice to the
Purchaser's rights under Section 14, the Depositary may, nevertheless, on
behalf of the Purchaser (which is an affiliate of the General Partner) retain
tendered Units, and those Units may not be withdrawn except to the extent that
the tendering Limited Partners are entitled to withdrawal rights as described
in Section 4; subject, however, to the Purchaser's obligation under Rule
14e-1(c) under the Exchange Act to pay Limited Partners the Purchase Price in
respect of Units tendered or return those Units promptly after termination or
withdrawal of the Offer.
The Purchaser (which is an affiliate of the General Partner) reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of the Purchaser's affiliates, the right to purchase Units tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering Limited Partners to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Units must be validly tendered and not withdrawn on or prior
to the Expiration Date. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest and any other documents required by
the Assignment of Partnership Interest must be received by the Depositary, at
its address set forth on the back cover of this Offer to Purchase, on or prior
to the Expiration Date. A Limited Partner may tender any or all of the Units
owned by that Limited Partner; provided, however, that because of restrictions
in the Limited Partnership Agreement, a partial tender of Units must be for a
minimum of five Units (other than Limited Partners who hold Units in an IRA or
Xxxxx Plan). Accordingly, any Limited Partner that owns five or fewer Units
(other than Limited Partners who Units in an IRA or Xxxxx Plan) must tender all
or none of its Units. Tenders of fractional Units will not be permitted, except
by a Limited Partner who is tendering all of the Units owned by that Limited
Partner. No alternative, conditional or contingent tenders will be accepted.
Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Units and payment is to be made directly
to that holder, then no signature guarantee is required on the Assignment of
Partnership Interest. Similarly, if the Units are tendered for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial
7
bank, savings bank, credit union, savings and loan association or trust company
having an office, branch or agency in the United States (each an "Eligible
Institution"), no signature guarantee is required on the Assignment of
Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE
ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION. Please contact the Information Agent for assistance in obtaining a
signature guarantee.
Delivery of Assignment of Partnership Interest. The method of delivery
of the Assignment of Partnership Interest and all other required documents is
at the option and risk of the tendering Limited Partner, and delivery will be
deemed made only when actually received by the Depositary. In all cases,
sufficient time should be allowed to assure timely delivery.
Appointment as Proxy; Power of Attorney. By executing an Assignment of
Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the General Partner), and its managers and
designees as the Limited Partner's proxies, in the manner set forth in the
Assignment of Partnership Interest, each with full power of substitution, to
the full extent of the Limited Partner's rights with respect to the Units
tendered by the Limited Partner and accepted for payment by the Purchaser
(which is an affiliate of the General Partner). Each such proxy shall be
considered coupled with an interest in the tendered Units. Such appointment
will be effective when, and only to the extent that, the Purchaser (which is an
affiliate of the General Partner) accepts the tendered Units for payment. Upon
such acceptance for payment, all prior proxies given by the Limited Partner
with respect to the Units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). The
Purchaser (which is an affiliate of the General Partner) and its managers and
designees will, as to those Units, be empowered to exercise all voting and
other rights of the Limited Partner as they in their sole discretion may deem
proper at any meeting of Limited Partners, by written consent or otherwise. The
Purchaser (which is an affiliate of the General Partner) reserves the right to
require that, in order for Units to be deemed validly tendered, immediately
upon the Purchaser's acceptance for payment of the Units, the Purchaser must be
able to exercise full voting rights with respect to the Units, including voting
at any meeting of Limited Partners then scheduled or acting by written consent
without a meeting.
By executing an Assignment of Partnership Interest, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and its
managers and designees as the Limited Partner's attorneys-in-fact, each with
full power of substitution, to the full extent of the Limited Partner's rights
with respect to the Units tendered by the Limited Partner and accepted for
payment by the Purchaser. Such appointment will be effective when, and only to
the extent that, the Purchaser accepts the tendered Units for payment. The
tendering Limited Partner agrees not to exercise any rights pertaining to the
tendered Units without the prior consent of the Purchaser. Upon such acceptance
for payment, all prior powers of attorney granted by the Limited Partner with
respect to such Units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the Purchaser
and its managers and designees each will have the power, among other things,
(i) to transfer ownership of such Units on the Partnership books maintained by
the General Partner (and execute and deliver any accompanying evidences of
transfer and authenticity any of them may deem necessary or appropriate in
connection therewith), (ii) upon receipt by the Depositary (as the tendering
Limited Partner's agent) of the Purchase Price, to become a substituted Limited
Partner, to receive any and all distributions made by the Partnership on or
after the date on which the Purchaser purchases such Units, and to receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Units in accordance with the terms of the Offer, (iii) to execute and deliver
to the General Partner a change of address form instructing the General Partner
to send any and all future distributions to which the Purchaser is entitled
pursuant to the terms of the Offer in respect of tendered Units to the address
specified in such form, and (iv) to endorse any check payable to or upon the
order of such Limited Partner representing a distribution to which the
Purchaser is entitled pursuant to the terms of the Offer, in each case in the
name and on behalf of the tendering Limited Partner.
Assignment of Interest in Future Distributions. By executing an
Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the General Partner) and its
assigns all of the right, title and interest of the Limited Partner in and to
any and all distributions made by the Partnership on or after the date on which
the Purchaser purchases such Units, in respect of the Units tendered by such
Limited Partner and accepted for payment by the Purchaser, regardless of the
fact that the record date for any
8
such distribution may be a date prior to the date of such purchase. The
Purchaser will seek to be admitted to the Partnership as a substituted Limited
Partner upon consummation of the Offer.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Units pursuant to the Offer will be determined by the Purchaser
(which is an affiliate of the General Partner), in its sole discretion, which
determination shall be final and binding. The Purchaser (which is an affiliate
of the General Partner) reserves the absolute right to reject any or all
tenders of any particular Units determined by it not to be in proper form or if
the acceptance of or payment for those Units may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser (which is an affiliate of the
General Partner) also reserves the absolute right to waive or amend any of the
conditions of the Offer that it is legally permitted to waive as to the tender
of any particular Units and to waive any defect or irregularity in any tender
with respect to any particular Units of any particular Limited Partner. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Assignment of Partnership Interest and the Instructions thereto) will be
final and binding. No tender of Units will be deemed to have been validly made
until all defects and irregularities have been cured or waived. None of the
Purchaser (which is an affiliate of the General Partner), the Information
Agent, the Depositary or any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Units or
will incur any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, each tendering Limited Partner must provide the
Purchaser (which is an affiliate of the General Partner) with the Limited
Partner's correct taxpayer identification number by completing the Substitute
Form W-9 included in the Assignment of Partnership Interest. See the
Instructions to the Assignment of Partnership Interest and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Unit purchased, each tendering Limited Partner
must complete the FIRPTA Affidavit included in the Assignment of Partnership
Interest certifying the Limited Partner's taxpayer identification number and
address and that such Limited Partner is not a foreign person.
See the Instructions to the Assignment of Partnership Interest and Section 6.
Binding Obligation. A tender of Units pursuant to and in accordance
with the procedures described in this Section 3 and the acceptance for payment
of such Units will constitute a binding agreement between the tendering Limited
Partner and the Purchaser (which is an affiliate of the General Partner) on the
terms set forth in this Offer to Purchase and in the Assignment of Partnership
Interest.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Units pursuant to the Offer
are irrevocable, except that Units tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless already accepted
for payment as provided in this Offer to Purchase, may also be withdrawn at any
time after September 28, 1998. For withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Units to be withdrawn and must be signed by the person(s) who
signed the Assignment of Partnership Interest in the same manner as the
Assignment of Partnership Interest was signed (including signature guarantees
by an Eligible Institution). Units properly withdrawn will be deemed not to be
validly tendered for purposes of the Offer. Withdrawn Units may be re-tendered,
however, by following the procedures described in Section 3 at any time prior
to the Expiration Date.
If payment for Units is delayed for any reason or if the Purchaser
(which is an affiliate of the General Partner) is unable to pay for Units for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
tendered Units may be retained by the Depositary and may not be withdrawn
except to the extent that tendering Limited Partners are entitled to withdrawal
rights as set forth in this Section 4; subject, however, to the Purchaser's
obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Limited
Partners the Purchase Price in respect of Units tendered or return those Units
promptly after termination or withdrawal of the Offer.
9
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser (which is an
affiliate of the General Partner), in its sole discretion, which determination
shall be final and binding. None of the Purchaser, the Information Agent, the
Depositary or any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser (which is an affiliate of the General Partner) expressly reserves the
right, in its sole discretion, at any time and from time to time, (i) to extend
the period of time during which the Offer is open and thereby delay acceptance
for payment of, and the payment for, validly tendered Units, (ii) to terminate
the Offer if any condition referred to in Section 14 has not been satisfied or
upon the occurrence of any event specified in Section 14 and (iii) to amend the
Offer in any respect (including, without limitation, by increasing the
consideration offered, increasing or decreasing the number of Units being
sought, or both). Notice of any such extension, termination or amendment will
be disseminated promptly to Limited Partners in a manner reasonably designed to
inform Limited Partners of such change in compliance with Rule 14d-4(c) under
the Exchange Act. In the case of an extension of the Offer, the extension will
be followed by a press release or public announcement which will be issued no
later than 9:00 a.m., New York City time, on the next business day after the
then scheduled Expiration Date, in accordance with Rule 14e-1(d) under the
Exchange Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Units) is delayed in its payment for Units or is unable to pay
for Units pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Units
and those Units may not be withdrawn except to the extent tendering Limited
Partners are entitled to withdrawal rights as described in Section 4; subject,
however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Limited Partners the Purchase Price in respect of Units
tendered or return those Units promptly after termination or withdrawal of the
Offer.
If the Purchaser (which is an affiliate of the General Partner) makes
a material change in the terms of the Offer or the information concerning the
Offer or waives a material condition of the Offer, the Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer will depend upon the
facts and circumstances, including the relative materiality of the change in
the terms or information. In the Commission's view, an offer should remain open
for a minimum of five business days from the date the material change is first
published, sent or given to securityholders, and if material changes are made
with respect to information that approaches the significance of price or the
percentage of securities sought, a minimum of ten business days may be required
to allow for adequate dissemination to securityholders and investor response.
As used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Units pursuant to the Offer.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations thereunder, administrative rulings,
practice and procedures and judicial authority, all as of the date of the
Offer. All of the foregoing are subject to change, and any such change could
affect the continuing accuracy of this summary. This summary does not discuss
all aspects of federal income taxation that may be relevant to a particular
Limited Partner in light of such Limited Partner's specific circumstances or to
certain types of Limited Partners subject to special treatment under the
federal income tax laws (for example, foreign persons, dealers in securities,
banks, insurance companies and tax-exempt organizations), nor (except as
otherwise expressly indicated) does it describe any aspect of state, local,
foreign or other tax laws. Sales of Units pursuant to the Offer will be taxable
transactions for federal income tax purposes, and also may be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
LIMITED PARTNER SHOULD CONSULT ITS
10
OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER
OF SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Limited Partner's "amount realized" on the sale and (ii) the
Limited Partner's adjusted tax basis in the Units sold. Generally, a Limited
Partner's adjusted tax basis with respect to a Unit equals its cost, increased
by the amount of income and the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit, and decreased by (i)
any distributions made with respect to such Unit, (ii) the amount of deductions
or losses allocated to the Unit and (iii) any decrease in the amount of
Partnership liabilities (as determined under Code Section 752) allocated to the
Unit. Thus, the amount of a Limited Partner's adjusted tax basis in tendered
Units will vary depending upon the Limited Partner's particular circumstances.
The "amount realized" with respect to a Unit will be a sum equal to the amount
of cash received by the Limited Partner for the Unit pursuant to the Offer,
plus the amount of the Partnership's liabilities allocable to the Unit (as
determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held by
the Limited Partner as a capital asset. Under the IRS Restructuring and Reform
Act of 1998, the capital gains rate for individuals and other non-corporate
taxpayers is 20% for sales of capital assets held for more than one year.
However, any gain from the sale of such assets attributable to the recapture of
depreciation with respect to real property (other than certain depreciation
recapture taxable as ordinary income) is taxed at a maximum rate of 25%.
Corporate taxpayers are taxed at a maximum marginal rate of 35% for both
capital gains and ordinary income. The maximum marginal federal income tax rate
for ordinary income of individuals and other noncorporate taxpayers is 39.6%.
Capital losses are deductible only to the extent of capital gains, except that,
subject to the passive activity loss limitations discussed below, non-corporate
taxpayers may deduct up to $3,000 of capital losses in excess of the amount of
their capital gains against ordinary income. Excess capital losses generally
can be carried forward to succeeding years (a corporation's carryforward period
is five years and a non-corporate taxpayer can carry forward such losses
indefinitely); and a corporation is permitted to carry back excess capital
losses to the three preceding taxable years, provided the carryback does not
increase or produce a net operating loss for any of those years.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Limited Partnership
Agreement concerning transfers of Units. Such allocation and any cash
distributed by the Partnership to the Limited Partner for that year will affect
the Limited Partner's adjusted tax basis in Units and, therefore, the amount of
such Limited Partner's taxable gain or loss upon a sale of Units pursuant to
the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain or loss realized by a Limited Partner is attributable to
"unrealized receivables" (which includes certain depreciation recapture) or
"substantially appreciated inventory" as defined in Code Section 751, then a
portion of the Limited Partner's gain or loss may be ordinary rather than
capital. In addition, a portion of such gain may be taxed at the 25% rate
discussed above. A portion of the gain or loss upon the sale of Units may be
attributable to unrealized receivables. A Limited Partner who tenders Units
which are purchased pursuant to the Offer must file an information statement
with such Limited Partner's federal income tax return for the year of the sale
which provides the information specified in Treasury Regulation ss.
1.751-1(a)(3). A selling Limited Partner also must notify the Partnership of
the date of the transfer and the names, addresses and tax identification
numbers of the transferor(s) and transferee within 30 days of the date of the
transfer (or, if earlier, by January 15 of the following calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. A portion of any post-1986 losses of Limited
Partners from the Partnership may have been passive losses. Thus, Limited
Partners may have "suspended" passive losses from the Partnership (i.e.,
post-1986 net taxable losses in excess of statutorily permitted "phase-in"
amounts which have
11
not been used to offset income from other passive activities or from the
Partnership). Substantially all gain or loss from a sale of Units pursuant to
the Offer will be passive income or loss.
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses, if any (including a portion of any loss
recognized on the sale of Units), can be currently deducted (subject to other
applicable limitations) to the extent of the Limited Partner's passive income
from the Partnership for that year (including any gain recognized on the sale
of Units) plus any other passive income for that year. If, on the other hand, a
Limited Partner sells 100% of its Units pursuant to the Offer, any "suspended"
losses and any losses recognized upon the sale of the Units will be offset
first against any other net passive gain to the Limited Partner from the sale
of the Units and any other net passive activity income from other passive
activity investments, and the balance of any "suspended" net losses from the
Units will no longer be subject to the passive activity loss limitation and,
therefore, will be deductible by such Limited Partner from its other income
(subject to any other applicable limitations), including ordinary income. If a
tendering Limited Partner has suspended passive losses from the Partnership,
such Limited Partner must sell all of its Units to receive these tax benefits.
If more than 50,000 of the outstanding Units are tendered, some tendering
Limited Partners may not be able to sell 100% of their Units pursuant to the
Offer because of proration of the number of Units to be purchased by the
Purchaser. See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). In the event of a termination, the Partnership's tax year would close
and the Partnership would be treated for income tax purposes as if it had
contributed all of its assets and liabilities to a "new" partnership in
exchange for an interest in the "new" partnership. The Partnership would then
be treated as making a distribution of the interests in the "new" partnership
to the new partners and the remaining partners, followed by the liquidation of
the Partnership. Because the "new" partnership would be treated as having
acquired its assets on the date of the deemed contribution, a new depreciation
recovery period would begin on such date, the Partnership's annual depreciation
deductions over the next few years would be substantially reduced, and the
Partnership would have greater taxable income (or less tax loss) than if no tax
termination occurred. In addition, depreciation may be required to be allocated
to those Limited Partners that have a higher tax basis. A tax termination of
the Partnership would also terminate any partnership in which the Partnership
holds a majority interest (50% or more).
The Limited Partnership Agreement prohibits transfers of Units if a
transfer, when considered with all other transfers during the same applicable
twelve-month period, would cause a termination of the Partnership for tax
purposes. The Purchaser believes that even if the maximum number of Units is
purchased pursuant to the Offer, those transfers will not cause a tax
termination of the Partnership.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Units may be subject to 31% backup withholding unless those Limited
Partners provide a taxpayer identification number ("TIN") and certify that the
TIN is correct or properly certify that they are awaiting a TIN. A Limited
Partner may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Assignment of Partnership Interest.
If a Limited Partner who is subject to backup withholding does not properly
complete and sign the Substitute Form W-9, the Purchaser will withhold 31% from
payments to such Limited Partner.
Xxxx realized by a foreign Limited Partner on the sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under Code Section
1445, the transferee of an interest held by a foreign person in a partnership
which owns United States real property generally is required to deduct and
withhold a tax equal to 10% of the amount realized on the disposition. In order
to comply with this requirement, the Purchaser will withhold 10% of the amount
realized by a tendering Limited Partner unless the Limited Partner properly
completes and signs the FIRPTA Affidavit included as part of the Assignment of
Partnership Interest certifying the Limited Partner's TIN and address, and that
such Limited Partner is not a foreign person. Amounts withheld would be
creditable against a foreign Limited Partner's federal income tax liability
and, if in excess thereof, a refund could be obtained from the Internal Revenue
Service by filing a U.S. income tax return.
12
SECTION 7. EFFECTS OF THE OFFER.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of Units if a transfer, when considered with all other transfers
during the same applicable twelve-month period, would cause a termination of
the Partnership for federal or any applicable state income tax purposes. This
provision may limit sales of Units in the secondary market and in private
transactions for the twelve-month period following completion of the Offer. The
General Partner has advised the Purchaser that the Partnership will not process
any requests for recognition of substitution of Limited Partners upon a
transfer of Units during such twelve-month period which the General Partner
believes may cause a tax termination in contravention of the Limited
Partnership Agreement. In determining the number of Units for which the Offer
is made (representing approximately 25% of the outstanding Units), the
Purchaser (which is an affiliate of the General Partner) took this restriction
into account so as to permit normal historical levels of transfers to occur
following the transfers of Units pursuant to the Offer without violating this
restriction.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Units are purchased pursuant to the
Offer, the result will be a reduction in the number of Limited Partners. In the
case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Units and,
therefore, the Purchaser (which is an affiliate of the General Partner) does
not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for their
Units through secondary market transactions. See Section 13 for certain limited
information regarding recent secondary market sales of the Units.
The Units are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser (which is an affiliate of the General Partner) does not
expect or intend that consummation of the Offer will cause the Units to cease
to be registered under Section 12(g) of the Exchange Act. If the Units were to
be held by fewer than 300 persons, the Partnership could apply to de-register
the Units under the Exchange Act. Because the Units are widely held, however,
the Purchaser (which is an affiliate of the General Partner) believes that,
even if it purchases the maximum number of Units in the Offer, after that
purchase the Units will be held of record by more than 300 persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser and its managers and designees as
proxies with respect to the Units tendered by such Limited Partners and
accepted for payment by the Purchaser. See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 20,176 Units pursuant to the Offer (or
otherwise), IPT (which controls the General Partner, IPLP and the Purchaser)
will own in excess of 50% of the total outstanding Units and, as a result, will
be able to control the outcome of all voting decisions with respect to the
Partnership. Even if the Purchaser acquires a lesser number of Units pursuant
to the Offer, however, because IPT already owns (through IPLP) approximately
40% of the outstanding Units, it will be able to significantly influence the
outcome of all voting decisions with respect to the Partnership. In general,
IPLP and the Purchaser (which are affiliates of the General Partner) will vote
the Units owned by them in whatever manner they deem to be in the best
interests of IPT, which, because of their relationship with the General
Partner, also may be in the interest of the General Partner, but may not be in
the interest of other Limited Partners. This could (i) prevent non-tendering
Limited Partners from taking action they desire but that IPT opposes and (ii)
enable IPT to take action desired by IPT but opposed by non-tendering Limited
Partners. Under the Limited Partnership
13
Agreement, Limited Partners holding a majority of the Units are entitled to
take action with respect to a variety of matters, including: removal of the
General Partner and in certain circumstances election of a new or successor
general partner; dissolution of the Partnership; the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement.
The Offer will not result in any change in the compensation payable to
the General Partner or its affiliates. However, as a result of the Offer, the
Purchaser (which is an affiliate of the General Partner) will participate, in
its capacity as a Limited Partner, in any subsequent distributions to Limited
Partners to the extent of the Units purchased pursuant to the Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the General Partner), is
seeking to acquire Units pursuant to the Offer in order to increase its equity
interest in the Partnership, primarily for investment purposes and with a view
to making a profit. Following the completion of the Offer, IPT and/or persons
related to or affiliated with it may acquire additional Units. Any such
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable. Any such
acquisition may be at a price higher or lower than the price to be paid for the
Units purchased pursuant to the Offer, and may be for cash or other
consideration. Insignia and IPT (which are affiliates of the General Partner)
also may consider disposing of some or all of the Units the Purchaser acquires
pursuant to the Offer, either directly or by a sale or other disposition of one
or more interests in IPT or IPLP, depending among other things on the
requirements from time to time of Insignia, IPT and their affiliates in light
of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to an extraordinary
transaction, such as a merger, reorganization or liquidation of the Partnership
or a sale or refinancing of any of the Partnership's properties or the CCEP
Properties, other than the potential financing of The Sterling Apartment Homes
and Commerce Center (as described in Section 9). However, IPT and the Purchaser
expect that consistent with the General Partner's fiduciary obligations, the
General Partner will seek and review opportunities (including opportunities
identified by IPT and the Purchaser) to engage in transactions which could
benefit the Partnership, such as sales or refinancings of assets or a
combination of the Partnership with one or more other entities, with the
objective of seeking to maximize returns to Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as part
of a complete liquidation; and (iv) mergers or other consolidation transactions
involving the Partnership. Any such merger or consolidation transaction could
involve other limited partnerships in which the General Partner or its
affiliates serve as general partners, or a combination of the Partnership with
one or more existing, publicly traded entities (including, possibly, affiliates
of IPT (which is an affiliate of the General Partner) or IPT itself), in any of
which Limited Partners might receive cash, common stock or other securities or
consideration. There is no assurance, however, as to when or whether any of the
transactions referred to above might occur. If any such transaction is effected
by the Partnership and financial benefits accrue to the Limited Partners of the
Partnership, the Purchaser (and thus IPT) will participate in those benefits to
the extent of its ownership of Units. A merger or other consolidation
transaction and certain kinds of other extraordinary transactions would require
a vote of the Limited Partners, and if the Purchaser is successful in acquiring
more than 20,176 Units pursuant to the Offer (or otherwise), IPT will be able
to control the outcome of any such vote. Even if the Purchaser acquires a
lesser number of Units pursuant to the Offer, however, because IPT already owns
(through IPLP) approximately 40% of the outstanding Units it will be able to
significantly influence the outcome of any such vote. IPT's primary objective
in seeking to acquire the Units through the Purchaser pursuant to the Offer is
not, however, to influence the vote on any particular transaction, but rather
to generate a profit on the investment represented by those Units.
14
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP AND CCEP.
Except as otherwise indicated, information contained in this Section 9 is based
upon documents and reports publicly filed by the Partnership (including
information on CCEP and the CCEP Properties contained in exhibits to the
Partnership's public documents) with the Commission.
General. The Partnership was organized on April 28, 1981 under the
laws of the State of California. Its principal executive offices are located at
Xxx Xxxxxxxx Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its
telephone number at that address is (000) 000-0000.
The Partnership was formed for the purpose of making loans to a
predecessor partnership of CCEP. CCEP's indebtedness in respect of the loans
made to it and its predecessor partnership by the Partnership now is
represented by the Loan. The Loan is secured by deeds of trust or mortgages on
the CCEP Properties. The non-recourse provisions of the Loan mean that CCEP's
obligation to repay the Loan is secured only by the value of the collateral
(that is, the CCEP Properties), and the Partnership has no right to make
further claims against CCEP other than to the extent of the value of those
properties. The Loan Agreement provides that interest on the outstanding
principal balance accrues at a variable rate (12.5% per year at March 31,
1998), subject to a maximum rate of 12.5% per year, although such interest is
payable only to the extent CCEP has "excess cash flow" (generally defined as
net cash flow from operations after third party debt service and capital
improvements). Accrued unpaid interest is added to principal. At March 31,
1998, the aggregate outstanding principal balance of the Loan (including
interest accrued and added to principal pursuant to the terms of the Loan) was
approximately $297,986,000). This amount is substantially greater than the
estimated fair market value of the CCEP Properties (which are the only source
of repayment for the Loan). Under the terms of the Loan, any net proceeds from
sales or refinancings of the CCEP Properties are paid to the Partnership, after
payment of a 3% disposition fee to ConCap Holdings (or to the General Partner
with respect to the Partnership's properties). ConCap Holdings (which is an
affiliate of the General Partner and the sole general partner of CCEP) has full
discretion with respect to conducting CCEP's business, including managing the
CCEP Properties and initiating and approving capital expenditures and asset
dispositions and obtaining financing on, or refinancing any CCEP Property.
Accordingly, the amount of cash flow received by the Partnership pursuant to
the terms of the Loan depends heavily on the discretion exercised by ConCap
Holdings with respect to sales or refinancings of, or obtaining financing on,
any CCEP Property.
In addition to the Loan, the Partnership owns two properties directly,
both of which were formerly collateral for the Loan but which the Partnership
later acquired through separate foreclosure proceedings: a 188-unit residential
apartment complex in Raleigh, North Carolina; and a combined 537-unit
residential apartment complex and 111,741 square foot commercial complex in
Philadelphia, Pennsylvania.
CCEP's investment portfolio currently consists of one office building
and 11 residential apartment complexes, all of which serve as collateral for
the Loan. The deeds of trust in favor of the Partnership that encumber the CCEP
Properties are subordinated to the mortgage liens in favor of unaffiliated
third parties that secure an aggregate indebtedness (the "Senior Mortgage
Indebtedness") of $22,996,055 (as of June 30, 1998). Those properties are as
follows: a 123,942 square foot commercial complex in San Francisco, California;
a 343- unit residential apartment complex in Fern Park, Florida; a 274-unit
residential apartment complex in Overland Park, Kansas; a 262-unit residential
apartment complex in Colorado Springs, Colorado; a 150-unit residential
apartment complex in Tampa, Florida; a 372-unit residential apartment complex
in Plantation, Florida; a 246-unit residential apartment complex in Baton
Rouge, Louisiana; a 228-unit residential apartment complex in Shreveport,
Louisiana; a 248-unit residential apartment complex in El Paso, Texas; a
324-unit residential apartment complex in Tampa, Florida; a 200-unit
residential apartment complex in Indian Harbor, Florida; and a 205-unit
residential apartment complex in Lexington, Kentucky.
Originally Anticipated Term of Partnership; Alternatives. According to
the Partnership's Prospectus dated April 26, 1982, ConCap Partners (CCEP's
predecessor in interest) anticipated that it would sell and/or refinance its
properties, and consequently repay the Loan, ten years after their acquisition,
depending upon the then current real estate and money markets, economic climate
and income tax consequences to the partners of ConCap Partners. The
reorganization of ConCap Partners and its subsequent conversion into CCEP in
1990 resulted in a de facto extension of the originally anticipated ten-year
time period. See Section 13. Under the Limited Partnership
15
Agreement, the term of the Partnership will continue until December 31, 2011,
unless sooner terminated as provided in the Limited Partnership Agreement or by
law. Limited Partners could, as an alternative to tendering their Units, take a
variety of possible actions including voting to liquidate the Partnership or
causing the Partnership to merge with another entity or engage in a "roll-up"
or similar transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner and ConCap Holdings (which is an
affiliate of the General Partner) regularly evaluate the assets of the
Partnership and CCEP, respectively, by considering various factors, such as the
financial position of the Partnership and CCEP and real estate and capital
markets conditions. In this process, the General Partner and ConCap Holdings
monitor each property's specific locale and sub-market conditions, evaluating
current trends, competition, new construction and economic changes. The General
Partner and ConCap Holdings oversee each asset's operating performance and
continuously evaluate the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the General Partner or ConCap
Holdings to sell, obtain financing on, refinance, upgrade with capital
improvements or hold a particular Partnership property or CCEP Property,
respectively. The Partnership and CCEP could seek to arrange mortgage loans
secured by the CCEP Properties that would have priority over the Loan, and to
use the proceeds of those loans for distributions to the Limited Partners or
other appropriate purposes. The Original Loan Agreement contained the CCEP Debt
Limit Provision to the effect that CCEP was not permitted to incur indebtedness
owed to unaffiliated third parties on the CCEP Properties in an amount that
exceeded 25% of the original aggregate purchase price of the CCEP Properties.
The Limited Partnership Agreement describes the CCEP Debt Limit Provision and
references further information as found in the Original Loan Agreement. The
Amended Loan Agreement, which by its terms replaced the Original Loan
Agreement, does not contain the CCEP Debt Limit Provision; however, the
Purchaser has been advised that the General Partner has not determined whether
the CCEP Debt Limit Provision contained in the Original Loan Agreement
continues to apply despite the absence of that provision in the Amended Loan
Agreement. Such a determination is not likely to be made except in connection
with a future proposed financing, if any, and would depend heavily on the
advice received from legal counsel to the Partnership and the General Partner.
In any event, as a matter of law, CCEP would need the consent of the
Partnership in order to incur mortgage indebtedness secured by the CCEP
Properties that would have priority over the deeds of trust securing the Loan.
The Limited Partnership Agreement provides that Limited Partners holding a
majority of the outstanding Units may, with the consent of the General Partner,
approve amendments to the Amended Loan Agreement. The General Partner has
advised the Purchaser that it may in the future, if it deems it necessary or
appropriate under the circumstances, solicit the consent of the Limited
Partners in connection with the incurrence of additional or new mortgage
indebtedness that would be senior in priority to the Loan. Because these plans
are subject to change, there can be no assurance that any consent, if deemed
required, will be sought as described above, that CCEP will seek to obtain
financing of the type described above, or as to the amount or timing of any
distribution that might be made to Limited Partners from the proceeds of any
such financing. The Purchaser has been advised that the Partnership is
currently in the process of obtaining financing on the Sterling Apartment Homes
and Commerce Center in Philadelphia, Pennsylvania, and that upon completion of
the financing sometime during the second half of 1998, the General Partner
expects to distribute approximately $105 per Unit to the Limited Partners from
the proceeds of the financing; however, there can be no assurance as to whether
the General Partner will obtain this financing as expected. Based on the above
considerations and except for the potential financing of The Sterling Apartment
Homes and Commerce Center, the General Partner and ConCap Holdings are not
currently contemplating the sale or refinancing of, or obtaining financing on,
any other Partnership properties or the CCEP Properties.
Selected Financial and Property-Related Data. Set forth below are
summaries of certain financial and statistical information with respect to the
Partnership, CCEP and each of the Partnership's properties and the CCEP
Properties, all of which has been excerpted or derived from the Partnership's
Annual Reports on Form 10-K for the years ended December 31, 1997, 1996, 1995,
1994 and 1993 and the Partnership's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1998 and 1997. Information on CCEP and the CCEP
Properties is contained in exhibits to the Partnership's Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q. 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.
16
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
SELECTED FINANCIAL DATA
(in thousands, except Unit data)
THREE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, DECEMBER 31,
---------------------- --------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ----------- ----------- ---------- ----------- ----------- ---------
(UNAUDITED)
Statements of Operations Data:
Rental Income................. $ 2,181 $ 1,863 $ 7,969 $ 7,686 $ 2,069 $ 1,312 $ 1,195
Other Income.................. $ 1,857 $ 1,141 $ 3,700 $ 1,728 $ 3,196 $ 3,178 $ 4,985
Total Revenues............. $ 4,038 $ 3,004 $ 11,669 $ 9,414 $ 5,265 $ 4,490 $ 6,180
Income (Loss) from Operations
(before extraordinary item) $ 1,696 $ 886 $ 3,567 $ 828 $ (3,391) $ 2,994 $ (6,749)
Net Income (Loss)............. $ 1,696 $ 886 $ 3,567 $ 828 $ (3,391) $ 2,994 $ (6,749)
Net Income (Loss) per Unit.... $ 8.43 $ 4.41 $ 17.74 $ 4.12 $ (16.87) $ 14.90 $ (33.57)
AS OF AS OF
MARCH 31, DECEMBER 31,
---------------------- -------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ----------- ----------- ---------- ----------- ----------- --------
(UNAUDITED)
Balance Sheets Data:
Total Assets................... $ 91,465 $ 88,931 $ 91,628 $ 91,657 $106,351 $107,630 $108,442
Total Liabilities.............. $ 5,411 $ 5,456 $ 5,472 $ 7,069 $ 5,575 $ 426 $ 509
Limited Partners' Equity
(Deficit).................... $ 86,419 $ 83,866 $ 86,520 $ 84,968 $101,134 $107,498 $108,220
Units Outstanding.............. 199,052 199,052 199,052 199,052 199,052 199,045 199,046
Book Value per Unit............ $ 434.15 $ 421.33 $ 434.66 $ 426.86 $ 508.08 $ 540.07 $ 543.69
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
SELECTED FINANCIAL DATA*
(in thousands)
THREE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, DECEMBER 31,
----------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ---------
(UNAUDITED)
Statements of Operations Data:
Rental Income.................. $ 4,939 $ 4,777 $ 19,425 $ 19,848 $ 24,907 $ 22,987 $ 19,161
Other Income................... $ 389 $ 356 $ 1,310 $ 140 $ 119 $ 77 $ 173
Total Revenues.............. $ 5,328 $ 5,133 $ 20,735 $ 19,988 $ 25,026 $ 23,064 $ 19,334
Income (Loss) from Operations
(before extraordinary item). $ (8,506) $ (7,910) $ (32,557) $ (28,963) $ (37,915) $ (27,355) $ (24,515)
Net Income (Loss).............. $ (8,506) $ (7,910) $ (32,557) $ (28,963) $ (37,934) $ (27,355) $ (28,202)
AS OF AS OF
MARCH 31, DECEMBER 31,
----------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ---------
(UNAUDITED)
Balance Sheets Data:
Total Assets................... $ 36,709 $ 40,107 $ 37,097 $ 41,677 $ 45,601 $ 68,153 $ 70,968
Total Liabilities.............. $ 322,709 $ 292,954 $ 314,591 $ 286,614 $ 261,575 $ 246,193 $ 221,653
Limited Partners' Equity
(Deficit)..................... $(283,140) $(250,319) $(274,719) $(242,488) $(213,815) $(176,260) $(149,178)
--------------
* Per unit data is not applicable because limited partnership interests in
CCEP are closely held, and are not in the form of units. Limited Partners in
the Partnership do not own any equity interests in CCEP; rather, the
principal asset of the Partnership is the Loan, which is an obligation of
CCEP.
17
Description of Properties.
(a) Set forth below is a table showing the location, the date of
purchase, the nature of the Partnership's ownership interest in and the use of
each of the Partnership's properties.
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
-------- -------- ----------------- ---
The Loft Apartments 11/19/90 Fee ownership Residential Apartments
Raleigh, North Carolina (subject to first mortgage) (188 units)
The Sterling Apartment 12/01/95 Fee ownership Residential Apartments
Homes and Commerce Center (537 units)
Philadelphia, Pennsylvania Commercial Center
(111,741 sq. ft.)
(b) Set forth below is a table showing the location, the nature of
CCEP's ownership interest in and the use of the CCEP Properties. All fee
ownership of the CCEP Properties is held subject to the Loan.
PROPERTY TYPE OF OWNERSHIP USE
-------- ----------------- ---
444 Xx Xxxx Fee ownership Commercial Center
San Francisco, California (123,942 sq. ft.)
Indian Creek Village Apartments Fee ownership Residential Apartments
Overland Park, Kansas (subject to first mortgage) (274 units)
The Knolls Apartments Fee ownership Residential Apartments
Colorado Springs, Colorado (subject to first mortgage) (262 units)
Palm Lake Apartments Fee ownership Residential Apartments
Tampa, Florida (subject to first mortgage) (150 units)
Plantation Gardens Apartments Fee ownership Residential Apartments
Plantation, Florida (subject to first mortgage) (372 units)
Regency Oaks Apartments Fee ownership Residential Apartments
Fern Park, Florida (343 units)
Magnolia Trace Apartments Fee ownership Residential Apartments
Baton Rouge, Louisiana (246 units)
Shirewood Townhomes Apartments Fee ownership Residential Apartments
Shreveport, Louisiana (228 units)
Silverado Apartments Fee ownership Residential Apartments
El Paso, Texas (248 units)
Society Park Apartments Fee ownership Residential Apartments
Tampa, Florida (324 units)
Society Park East Apartments Fee ownership Residential Apartments
Indian Harbor, Florida (subject to first mortgage) (200 units)
Tates Creek Village Apartments Fee ownership Residential Apartments
Lexington, Kentucky (subject to first mortgage) (205 units)
18
Accumulated Depreciation Schedule.
(a) Set forth below is a table showing the gross carrying value,
accumulated depreciation and federal tax basis of each of the Partnership's
properties as of December 31, 1997 ($ amounts in thousands).
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
-------- ----- ------------ ---- ------ ---------
The Loft Apartments $ 6,832 $2,637 5-20 yrs. S/L $ 5,509
The Sterling Apartment
Homes and Commerce Center 28,503 2,377 5-25 yrs. S/L 27,205
--------- ------ ---------
TOTALS $ 35,335 $5,014 $ 32,714
========= ====== =========
(b) Set forth below is a table showing the gross carrying value and
accumulated depreciation of the CCEP Properties as of December 31, 1997 ($
amounts in thousands).
GROSS
CARRYING ACCUMULATED
PROPERTY VALUE DEPRECIATION RATE METHOD
-------- ----- ------------ ---- ------
444 Xx Xxxx $ 13,886 $ 9,855 3-18 yrs. S/L
Indian Creek Village Apartments 9,548 6,369 5-18 yrs. S/L
The Knolls Apartments 7,599 5,273 5-18 yrs. S/L
Palm Lake Apartments 4,641 3,469 5-18 yrs. S/L
Plantation Gardens Apartments 15,023 10,433 5-18 yrs. S/L
Regency Oaks Apartments 10,773 7,938 5-18 yrs. S/L
Magnolia Trace Apartments 6,570 4,543 5-18 yrs. S/L
Shirewood Townhomes Apartments 6,551 4,722 5-18 yrs. S/L
Silverado Apartments 5,288 3,867 5-18 yrs. S/L
Society Park Apartments 9,390 6,732 5-18 yrs. S/L
Society Park East Apartments 5,763 3,646 5-18 yrs. S/L
Tates Creek Village Apartments 7,588 5,329 5-18 yrs. S/L
---------- --------
TOTALS $ 102,620 $72,176
========== =======
Schedule of Mortgages.
(a) Set forth below is a table showing certain information regarding
the outstanding mortgage encumbering one of the Partnership's properties as of
December 31, 1997 ($ amounts in thousands).
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1997 RATE AMORTIZED DATE MATURITY
-------- ---- ---- --------- ---- --------
The Loft Apartments $4,448 6.95% (1) 12/2005 $3,903
----------------
(1) Payments of approximately $30,000, consisting of principal and interest,
are being amortized over 360 months with a balloon payment due December
1, 2005.
19
(b) Set forth below is a table showing certain information regarding
the outstanding mortgages encumbering the CCEP Properties as of December 31,
1997 ($ amounts in thousands). All CCEP Properties, including those listed
below, are held subject to the Loan.
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1997 RATE AMORTIZED DATE MATURITY
-------- ---- ---- --------- ---- --------
Indian Creek Village Apartments $ 4,600 6.95% (1) 12/2005 $ 4,036
The Knolls Apartments 5,310 6.95% (1) 12/2005 4,659
Palm Lake Apartments 1,713 6.95% (1) 12/2005 1,503
Plantation Gardens Apartments 6,949 6.95% (1) 12/2005 6,097
Society Park East Apartments 2,016 6.95% (1) 12/2005 1,769
Tates Creek Village Apartments 2,545 6.95% (1) 12/2005 2,233
-------- --------
TOTALS $ 23,133 $20,297
========
-----------
(1) Payments are amortized over 360 months with a balloon payment due
December 1, 2005.
Average Annual Rental Rate and Occupancy.
(a) Set forth below is a table showing the average annual rental rates
and occupancy percentages for each of the Partnership's properties during the
past two years.
PROPERTY AVERAGE ANNUAL RENTAL RATE AVERAGE ANNUAL OCCUPANCY
-------- -------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
The Loft Apartments $ 8,425/unit $ 8,093/unit 95% 95%
The Sterling Apartment $ 11,740/unit $ 10,886/unit 87% 84%
Homes (residential)
The Sterling Commerce $ 13.87/sq.ft. $ 7.34/sq.ft. 70% 68%
Center (commercial)
(b) Set forth below is a table showing the average annual rental rates
and occupancy percentages for the CCEP Properties during 1997.
AVERAGE
AVERAGE ANNUAL ANNUAL
PROPERTY RENTAL RATE OCCUPANCY
-------- ----------- ---------
444 Xx Xxxx $ 13.94/sq.ft. 94%
Indian Creek Village Apartments $ 7,521/unit 94%
The Knolls Apartments $ 7,515/unit 95%
Palm Lake Apartments $ 7,284/unit 95%
Plantation Gardens Apartments $ 8,292/unit 93%
Regency Oaks Apartments $ 6,292/unit 91%
Magnolia Trace Apartments $ 5,654/unit 91%
Shirewood Townhomes Apartments $ 4,909/unit 88%
Silverado Apartments $ 5,672/unit 91%
Society Park Apartments $ 5,446/unit 93%
Society Park East Apartments $ 6,253/unit 96%
Tates Creek Village Apartments $ 7,588/unit 90%
20
Schedule of Real Estate Taxes and Rates.
(a) Set forth below is a table showing the real estate taxes and rates
for 1997 for each of the Partnership's properties.
1997 1997
PROPERTY BILLING RATE
-------- ------- ----
The Loft Apartments $ 63,000 1.23%
The Sterling Apartment
Homes and Commerce Center $ 502,000 8.72%
(b) Set forth below is a table showing the real estate taxes and rates
for 1997 for the CCEP Properties.
1997 1997
PROPERTY BILLING RATE
-------- ------- ----
444 Xx Xxxx $ 101,000 1.19%
Indian Creek Village Apartments $ 106,000 9.72%
The Knolls Apartments $ 56,000 5.92%
Palm Lake Apartments $ 53,000 2.52%
Plantation Gardens Apartments $ 326,000 0.25%
Regency Oaks Apartments $ 134,000 1.86%
Magnolia Trace Apartments $ 25,000 10.00%
Shirewood Townhomes Apartments $ 46,000 20.1%
Silverado Apartments $ 103,000 2.76%
Society Park Apartments $ 147,000 2.57%
Society Park East Apartments $ 103,000 2.25%
Tates Creek Village Apartments $ 54,000 1.09%
Other Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial results and other matters. Such reports and other documents may be
inspected at the Commission's Public Reference Section, Room 1024, 000 Xxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, where copies may be obtained at
prescribed rates, and at the regional offices of the Commission located in the
Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
and 7 World Trade Center, New York, New York 10048. Copies should be available
by mail upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000. The Commission also maintains a web site that contains reports, proxy
and other information filed electronically with the Commission, the address of
which is xxxx://xxx.xxx.xxx.
Cash Distributions History. The Partnership has made a cash distribution
to Limited Partners of $8.95 per Unit in 1998 (through July 30), and made
distributions of $9.94 per Unit in 1997 and $85.25 per Unit in 1996. The 1996
distribution was not made completely out of operating cash flow; rather, that
distribution was made primarily out of the amount of working capital reserves,
including the proceeds from financing obtained on certain of the Partnership's
properties and certain of the CCEP Properties, which exceeded the amount
required to be held under the Limited Partnership Agreement. The Limited
Partnership Agreement requires that the General Partner maintain minimum
working capital reserves ($7,261,000 at June 30, 1998) equal to 5% of net
Invested Capital (as defined in the Limited Partnership Agreement). In total,
original investors in the Partnership have received distributions of $915.82 in
respect of their original $1,000 investment made in 1982.
Operating Budgets of the Partnership and CCEP. A summary of the combined
fiscal 1997 and 1998 operating budgets and the audited results of operations
for fiscal 1997 of the Partnership and CCEP are set forth in the table below.
The budgeted amounts provided below are figures that were not computed in
accordance with generally accepted accounting principles ("GAAP").
Historically, budgeted operating results of operations for a particular fiscal
year have differed significantly in certain respects from the audited operating
results for that year. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budgets are
21
often re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. Furthermore, any
estimate of the future performance of a business, such as the Partnership's or
CCEP's business, is forward-looking and based on numerous assumptions, some of
which inevitably will prove to be incorrect. For this reason, it is probable
that the combined future operating results of the Partnership and CCEP will
differ from those projected in the operating budget, and those differences may
be material. Therefore, such information should not be relied on by Limited
Partners.
FISCAL 1997 FISCAL 1997 FISCAL 1998
BUDGETED AUDITED BUDGETED
-------- ------- --------
Total Revenues from Property Operations.......... $29,278,000 $29,736,000 $31,147,000
Total Operating Expenses ........................ $16,007,000 $19,570,000 $18,034,000
Net Operating Income............................. $13,271,000 $10,166,000 $13,113,000
Capital Expenditures............................. $11,272,000 $10,627,000 $ 3,836,000
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives to
seek to maximize the value of its ownership of Units, which in turn may result
in a conflict for the General Partner in attempting to reconcile the interests
of the Purchaser (which is an affiliate of the General Partner) with the
interests of the other Limited Partners. In addition, the Purchaser (which is
an affiliate of the General Partner) is making the Offer with a view to making
a profit. Accordingly, there is a conflict between the desire of the Purchaser
(which is an affiliate of the General Partner) to purchase Units at a low price
and the desire of the Limited Partners to sell their Units at a high price. The
General Partner has indicated in the Schedule 14D-9 that it is remaining
neutral and making no recommendation as to whether Limited Partners should
tender their Units pursuant to the Offer. LIMITED PARTNERS ARE URGED TO READ
THIS OFFER TO PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Voting by the Purchaser. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, when admitted, will have the right to vote each Unit
purchased pursuant to the Offer. Even if the Purchaser (which is an affiliate
of the General Partner) is not admitted to the Partnership as a substituted
Limited Partner, however, the Purchaser nonetheless will have the right to vote
each Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser (which is an affiliate of the
General Partner) and its managers and designees as proxies with respect to the
Units tendered by such Limited Partners and accepted for payment by the
Purchaser. See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 20,176 Units pursuant to the Offer (or
otherwise), IPT (which controls the General Partner, IPLP and the Purchaser)
will own in excess of 50% of the total outstanding Units and, as a result, will
be able to control the outcome of all voting decisions with respect to the
Partnership. Even if the Purchaser acquires a lesser number of Units pursuant
to the Offer, however, because IPT already owns (through IPLP) approximately
40% of the outstanding Units it will be able to significantly influence the
outcome of all voting decisions with respect to the Partnership. In general,
IPLP and the Purchaser (which are affiliates of the General Partner) will vote
the Units owned by them in whatever manner they deem to be in IPT's best
interests, which, because of their relationship with the General Partner, also
may be in the interest of the General Partner, but may not be in the interest
of other Limited Partners. This could (i) prevent non-tendering Limited
Partners from taking action they desire but that IPT opposes and (ii) enable
IPT to take action desired by IPT but opposed by non-tendering Limited
Partners. Under the Limited Partnership Agreement, Limited Partners holding a
majority of the Units are entitled to take action with respect to a variety of
matters, including: removal of the General Partner and in certain circumstances
election of a new or successor
22
general partner; dissolution of the Partnership; the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Units it purchases pursuant to the
Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand and, if necessary, funds available to it under
its credit facility (as described in Section 12) to make such contributions.
See Section 12. It is possible, however, that in connection with its future
financing activities, IPT or IPLP may cause or request the Purchaser (which is
an affiliate of the General Partner) to pledge the Units as collateral for
loans, or otherwise agree to terms which provide IPT, IPLP and the Purchaser
with incentives to generate substantial near-term cash flow from the
Purchaser's investment in the Units. This could be the case, for example, if a
loan has a "balloon" maturity after a relatively short time or bears a high or
increasing interest rate. In such a situation, the General Partner may
experience a conflict of interest in seeking to reconcile the best interests of
the Partnership with the need of its affiliates for cash flow from the
Partnership's activities.
Transactions with Affiliates. Under the Limited Partnership Agreement,
the General Partner holds an interest in the Partnership and is entitled to
participate in certain cash distributions made by the Partnership to its
partners. The General Partner received from the Partnership in respect of its
interest in the Partnership cash distributions of $18,000 to date in 1998,
$20,000 in 1997, $30,000 in 1996 and $30,000 in 1995. The Partnership and CCEP
paid IRG and ICG property management fees for property management services in
the amounts of approximately $1,456,000, $1,409,000 and $1,373,000 for the
years ended December 31, 1997, 1996 and 1995, respectively, and have paid IRG
and ICG property management fees equal to $383,000 during the first three
months of 1998. The Partnership and CCEP reimbursed the General Partner, ConCap
Holdings and their affiliates (including Insignia) for expenses incurred in
connection with asset management and partnership administration services
performed by them for the Partnership for the three years ended December 31,
1997, 1996 and 1995 in the amounts of $1,013,000, $1,022,000 and $733,000,
respectively, and have reimbursed them in the amount of $201,000 through March
31, 1998. The reimbursement amounts include approximately $269,000 and
$369,000, respectively, for the years ended December 31, 1997 and 1996, and
$46,000 for the three months ended March 31, 1998, which amounts were paid to
an affiliate of the General Partner for costs incurred in connection with
construction oversight services. The reimbursement amounts for the year ended
December 31, 1997 and for the three months ended March 31, 1998 also include
$167,000 and $4,000, respectively, which amounts were paid to an affiliate of
the General Partner for commercial leasing commissions. CCEP paid $139,000,
$69,000 and $221,000 for the years ended December 31, 1997, 1996 and 1995,
respectively, and $2,000 for the three months ended March 31, 1998, to an
affiliate of the General Partner for commercial lease commissions. In addition,
CCEP is subject to an Investment Advisory Agreement between CCEP and an
affiliate of ConCap Holdings (which is an affiliate of the General Partner).
This agreement provides for an annual fee, payable in monthly installments, to
an affiliate of ConCap Holdings for advisory and consulting services for the
CCEP Properties. Advisory fees paid pursuant to this agreement were $182,000,
$182,000 and $233,000, respectively, for the years ended December 31, 1997,
1996 and 1995, and $44,000 for the three months ended March 31, 1998. During
1995, an affiliate of the General Partner was paid $28,000 in connection with
obtaining financing on one of the Partnership's properties. For the period
January 1, 1996 through August 31, 1997, each of the Partnership and CCEP
insured its properties under a master policy through an agency affiliated with
the General Partner, but with an insurer unaffiliated with the General Partner.
An affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the then current year's master policy. That agent
assumed the financial obligations to the affiliate of the General Partner who
received payments on these obligations from the agent. Insignia and the General
Partner believe that the aggregate financial benefit derived by Insignia and
its affiliates from such arrangement was immaterial.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of making the Offer. The Purchaser is a wholly-owned subsidiary of
IPLP. The Purchaser (which is an affiliate of the General Partner) has not
engaged in any business activity other than in connection with the Offer and
certain other tender offers for units of limited partnership interests in other
IPT Partnerships (as defined below) being made contemporaneously with the
Offer, and has no significant assets or liabilities at the present time. Upon
consummation of the Offer and such other offers, the Purchaser's only
significant assets will be the Units it acquires pursuant to the Offer and the
other limited partnership units it acquires pursuant to such other offers.
23
The principal executive offices of the Purchaser (which is an
affiliate of the General Partner) are located at One Insignia Financial Plaza,
P.O. Box 19059, Greenville, South Carolina 29602, and its telephone number is
(000) 000-0000. For certain information concerning the managers of the
Purchaser (which is an affiliate of the General Partner), see Schedule I to
this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996, for the purpose
of acquiring and owning interests in multi-family residential properties,
principally through ownership of limited and general partner interests in real
estate limited partnerships (including the Partnership). IPT has been organized
and operates in a manner that will qualify it to be taxed as a real estate
investment trust ("REIT") under the Code. Substantially all of IPT's
investments are held through IPLP, which is the operating partnership of IPT.
IPT is presently the sole general partner and Insignia is presently the sole
limited partner of IPLP.
IPT has engaged Insignia to provide certain investment banking and
related services to IPT and IPLP, including in connection with the Offer.
Substantially all of IPT's assets consist of (i) interests in entities
which comprise or control the managing general partners of real estate limited
partnerships, including the Partnership (the "IPT Partnerships"), which
interests are held by IPT directly, and (ii) limited partner interests in the
IPT Partnerships, which interests are held through IPLP. The IPT Partnerships
own, in the aggregate, 349 properties containing approximately 73,000
residential apartment units and approximately 5.9 million square feet of
commercial space. See Schedule IV for a list of the IPT Partnerships in which
IPT has a material investment.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which at the time
was an affiliate of IPT but has subsequently been merged into IPT, see Section
13) ("MAE GP"), and Angeles Mortgage Investment Trust, an unincorporated
California business trust ("AMIT"), entered into a definitive merger agreement
(the "AMIT Merger Agreement"), pursuant to which AMIT is to be merged with and
into IPT, with IPT being the surviving entity, in a stock for stock transaction
(the "AMIT Merger"). XXXX is a public company whose Class A shares trade on the
American Stock Exchange under the symbol ANM. Insignia and its affiliates
currently own 96,800 (or approximately 3.7%) of the 2,617,000 outstanding AMIT
Class A shares and all of the 1,675,113 outstanding AMIT Class B shares. If the
AMIT Merger is consummated, IPT will become a publicly traded company (IPT has
applied to list its shares on the American Stock Exchange, which listing would
be subject to completion of the AMIT Merger), and it is anticipated that
Insignia and its affiliates will own approximately 57% of post-merger IPT, the
former AMIT shareholders (other than Insignia and its affiliates) will own
approximately 16% of post-merger IPT, and the current unaffiliated shareholders
of IPT will own the remaining 27% of post-merger IPT (see, however, the
discussion of the merger of Insignia and AIMCO in the following subsection of
this Section 9 captioned "Insignia").
The XXXX Xxxxxx is expected to be completed in the third quarter of
1998. However, consummation of the AMIT Merger is subject to several
conditions, including approval of the AMIT Merger Agreement and the AMIT Merger
by the shareholders of AMIT. Accordingly, there can be no assurance as to when
the AMIT Merger will occur, or that it will occur at all.
The principal executive offices of IPT and IPLP are located at One
Insignia Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and
the telephone number of each is (000) 000-0000. For certain information
concerning the trustees and executive officers of IPT, see Schedule II to this
Offer to Purchase. IPLP does not have any officers or employees.
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
24
INSIGNIA PROPERTIES TRUST
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except share and unit data)
THREE MONTHS ENDED Year Ended Year Ended
MARCH 31, 1998 December 31, 1997 December 31, 1996
-------------- ----------------- -----------------
(unaudited) (audited) (audited)
Statements of Operations Data:
Revenues.......................................... $ 5,757 $ 16,826 $ 9,705
Income Before Extraordinary Item.................. $ 2,054 $ 6,074 $ 3,557
Net Income........................................ $ 2,080 $ 6,004 $ 2,425
Supplemental Data:
Funds From Operations(1).......................... $ 7,439 $ 20,939 $ 12,563
IPT Common Shares Outstanding..................... $ 19,427,760 $ 18,573,151 $ 11,168,036
IPLP Units Outstanding............................ $ 9,934,476 $ 9,415,947 $ 8,399,499
----------- ---------- ----------
IPT Common Shares and IPLP Units Outstanding(2)... $ 29,362,236 $ 27,989,098 $ 19,567,535
========== ========== ==========
Balance Sheets Data:
Cash.............................................. $ 23,338 $ 37,432 $ 4,928
Investments in IPT Partnerships(3)................ $ 177,681 $ 159,469 $ 118,741
Long-Term Debt.................................... $ 21,957 $ 19,300 $ 19,730
Shareholders' Equity(4)........................... $ 206,298 $ 200,659 $ 121,068
------------------
(1) Funds from Operations represent income or loss from real estate operations,
which is net income or loss in accordance with GAAP, excluding gains or
losses from debt restructuring or sales of property, plus depreciation and
provision for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) As of March 31, 1998, represented IPT's investment in 41 of the 124 IPT
Partnerships which IPT accounts for using the equity method. Of the
remaining 83 IPT Partnerships, IPT accounts for 81 using the cost method
and two using the consolidation method.
(4) Includes Insignia's minority interest in IPLP.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of commercial
properties. Insignia's real estate services include property management,
providing all of the day-to-day services necessary to operate a property,
whether residential or commercial; asset management, including long-term
financial planning, monitoring and implementing capital improvement plans, and
development and execution of refinancings and dispositions; real estate leasing
and brokerage; maintenance and construction services; marketing and
advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 3,800 properties, which include approximately 272,000 residential
units (including cooperative and condominium units), and in excess of 208
million square feet of retail, commercial and industrial space, located in over
500 cities in 48 states, Italy, the United Kingdom and Germany. Insignia
currently provides partnership administration services to approximately 900
limited partnerships having approximately 350,000 limited partners. Insignia is
a public company whose stock is traded on the New York Stock Exchange under the
symbol IFS.
On March 17, 1998, Insignia and Apartment Investment and Management
Company, a Maryland corporation ("AIMCO") entered into a definitive merger
agreement, (as amended and restated, the "AIMCO Merger Agreement"), pursuant to
which substantially all of Insignia's residential real estate operations and
ownership interests, including its interests in IPT and IPLP, are to be merged
with and into AIMCO, with AIMCO as the surviving corporation (the "AIMCO
Merger"). AIMCO is a public REIT whose Class A shares trade on the New York
Stock Exchange under the symbol AIV. The AIMCO Merger is expected to be
completed in the third quarter of 1998. However, consummation of the AIMCO
Merger is subject to certain conditions, including the approval of the
shareholders of Insignia. Accordingly, there can be no assurance as to when the
AIMCO Merger will occur, or that it will occur at all.
Assuming the AIMCO Merger is consummated, AIMCO will succeed to
Insignia's ownership of IPT and IPLP, and thus IPT (and the Partnership) will
thereafter be controlled by AIMCO. In addition, AIMCO is required pursuant to
the AIMCO Merger Agreement to acquire all of the outstanding shares of IPT not
owned by Insignia by causing IPT to merge with and into AIMCO (or a subsidiary
of AIMCO) as soon as practicable after the
25
consummation of the AIMCO Merger, in which event IPT would cease to exist as a
separate entity and AIMCO would effectively own all of the Units acquired by
the Purchaser pursuant to the Offer.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Certain information, as of
particular dates, concerning Insignia's business, principal properties, capital
structure, material pending legal proceedings, operating results, financial
condition, directors and officers (including their remuneration and stock
options granted to them), the principal holders of Insignia's securities, any
material interests of such persons in transactions with Insignia and certain
other matters is required to be disclosed in proxy statements and annual
reports distributed to Insignia's shareholders and filed with the Commission.
Such reports, proxy statements and other information may be inspected and
copied at the Commission's public reference facilities and should also be
available for inspection in the same manner as set forth with respect to the
Partnership in Section 9.
Insignia's principal executive offices are located at Xxx Xxxxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its telephone number is
(000) 000-0000. For certain information concerning the directors and executive
officers of Insignia, see Schedule III to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1997, 1996 and 1995 and the three-month periods ended March
31, 1998 and 1997. More comprehensive financial and other information is
included in Insignia's Annual Report on Form 10-K for the year ended December
31, 1997 (including management's discussion and analysis of financial condition
and results of operations) and in other reports and documents filed by Insignia
with the Commission. The financial information set forth below is qualified in
its entirety by reference to such reports and documents filed with the
Commission and the financial statements and related notes contained therein.
These reports and other documents may be examined and copies thereof may be
obtained in the manner set forth above.
26
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------------- -------------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------ ------------ ----------
(unaudited)
Statements of Operations Data:
Total Revenues.................................. $ 130,458 $ 67,912 $ 400,843 $ 227,074 $ 123,032
Income Before Taxes and Extraordinary Item...... $ 3,486 $ 3,340 $ 17,055 $ 14,946 $ 10,093
Net Income...................................... $ 1,917 $ 2,004 $ 10,233 $ 8,564 $ 5,806
Earnings Per Share.............................. $ 0.06 $ 0.06 $ 0.32 $ 0.26 $ 0.20
AS OF AS OF
MARCH 31, DECEMBER 31,
------------------------- -------------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------ ------------ ----------
(unaudited)
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 73,143 $ 69,821 $ 88,847 $ 54,614 $ 49,846
Receivables..................................... $ 151,919 $ 52,455 $ 122,180 $ 46,040 $ 26,445
Total Assets................................ $ 922,810 $ 486,809 $ 800,223 $ 492,402 $ 245,409
Accounts Payable................................ $ 17,347 $ 2,417 $ 13,705 $ 1,711 $ 1,497
Commissions Payable............................. $ 56,404 $ 18,264 $ 51,285 $ 18,736 $ 602
Accrued and Sundry Liabilities.................. $ 114,524 $ 32,186 $ 102,009 $ 40,741 $ 25,619
Long-Term Debt.................................. $ 258,422 $ 68,905 $ 189,704 $ 69,140 $ 42,996
Total Liabilities........................... $ 446,697 $ 121,772 $ 356,703 $ 130,328 $ 70,714
Redeemable Convertible Preferred Stock.......... -- -- -- -- $ 15,000
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 144,137 143,943 $ 144,065 $ 144,169 --
Minority Interest in Consolidated Subsidiaries.. $ 65,082 $ -- $ 61,546 -- $ 2,682
Shareholders' Equity........................ $ 266,894 $ 221,094 $ 237,909 $ 217,905 $ 157,013
Except as otherwise set forth herein, none of the Purchaser (which is
an affiliate of the General Partner), IPLP, IPT, Insignia or, to the best of
the Purchaser's knowledge, any of the persons listed on Schedules I, II or III
hereto, or any affiliate of the foregoing, (i) beneficially owns or has a right
to acquire any Units, (ii) has effected any transaction in the Units in the
last 60 days, or (iii) has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning the transfer or voting thereof,
joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss or the giving or withholding of proxies. Xxxxxx
X. Xxxxxx, who is the Chairman of the Board, Chief Executive Officer and
President of Insignia and a trustee of IPT, beneficially owns approximately 28%
of Insignia's outstanding common stock and, as a result, may be deemed to
beneficially own the Units owned by IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $21,250,000 will be required to
purchase 50,000 Units, if tendered, and to pay related fees and expenses. The
Purchaser (which is an affiliate of the General Partner) expects to obtain all
of those funds from IPLP, which in turn intends to use its cash on hand and
borrowings from its credit facility with a commercial bank and financial
institution. The Purchaser has not conditioned the Offer on obtaining
financing.
The following is a summary description of the existing credit facility
(the "Facility") provided for the benefit of IPLP pursuant to the Credit
Agreement, dated as of December 30, 1997 (the "Credit Agreement"), among IPLP,
as borrower, Xxxxxx Commercial Paper, Inc., as syndication agent, First Union
National Bank, as administrative agent and the lenders from time to time
parties thereto (the "Lenders"). This summary description does not purport to
be complete and is qualified in its entirety by reference to the Credit
Agreement, a copy of which has been filed as an exhibit to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission.
27
Pursuant to the Credit Agreement, the Lenders have made available to
IPLP a revolving credit facility of up to $50.0 million at any one time
outstanding. Loans under the Facility (the "Loans") may be utilized to finance
certain permitted investments and refinance certain investments made prior to
the date of the Credit Agreement. The Facility matures in a single installment
on December 30, 2000.
Loans bear interest, at IPLP's election, (i) at a rate equal to the
higher of (a) the rate announced from time to time by First Union National Bank
as its base lending rate or (b) the daily effective federal funds rate as
quoted by First Union National Bank; or (ii) at rates based on the London
interbank offered rate, as adjusted for certain reserve and other requirements
applicable to lenders, for one-, two-, three- or six-month periods plus an
interest margin of 2.50%. As of the date hereof, IPT has no outstanding
indebtedness under the Facility.
IPT is obligated to pay a commitment fee at a rate of 0.25% per annum
on the undrawn portion of the Facility. Such commitment fee is payable
quarterly in arrears and calculated based on the actual number of days elapsed
over a 365-day year.
The Loans are subject to mandatory prepayment only to the extent that
the aggregate outstanding principal amount of the Loans on any day exceeds the
amount of the Facility then in effect. Voluntary prepayments of the Loans and
voluntary reductions of the Facility are permitted in whole or in part at the
option of IPLP, in minimum principal amounts, without premium or penalty,
subject to reimbursement of certain of the Lenders' costs under certain
conditions.
IPLP's obligations under the Facility have been guaranteed by IPT and
such guaranty is secured by a first priority pledge of and security interest in
the capital stock or other equity interests held by IPT in each of the
subsidiaries of IPT which directly or indirectly, owns or controls the general
partner interest (including an interest in the General Partner) in any Real
Estate Entity (as defined below) in which IPLP, directly or indirectly owns a
limited partner interest (including the Partnership). In addition, the Facility
is secured by a first priority pledge of and security interest in all limited
partnership interests from time to time owned by IPLP and the equity interests
from time to time held by IPLP in any subsidiary of IPLP which itself owns
limited partnership interests. The Credit Agreement defines a "Real Estate
Entity" as any limited partnership, limited liability company, corporation or
other entity which has as its principal business the ownership of real property
or debt secured by real property. Thus, the IPT Partnerships (including the
Partnership) constitute Real Estate Entities for purposes of the Credit
Agreement.
The Facility contains representations and warranties, conditions
precedent, covenants, events of default and other provisions customarily found
in similar transactions.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation With the General Partner. Upon the Partnership's formation
in 1981, Consolidated Capital Equities Corporation ("CCEC"), a Colorado
corporation, was the corporate general partner and Consolidated Capital
Management Company, a California general partnership, was the non-corporate
general partner. As a result of a succession of agreements, CCEC became the
Partnership's managing general partner. In 1988, through a series of
transactions, Southmark Corporation acquired control of CCEC. In December 1988,
CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy
Code. In 1990, as part of CCEC's reorganization plan, the General Partner
acquired CCEC's general partner interests in the Partnership and in 15 other
affiliated public limited partnerships (the "Affiliated Partnerships") and the
General Partner replaced CCEC as the managing general partner of the
Partnership (and as the managing general partner of each of the Affiliated
Partnerships). The selection of the General Partner as the general partner of
the Partnership (and of each of the Affiliated Partnerships) was approved by a
majority of the Limited Partners in the Partnership (and by a majority of the
limited partners in each of the Affiliated Partnerships) pursuant to
solicitations commenced in August 1990. Insignia acquired the stock of the
General Partner through two transactions in December 1994 and October 1995, and
contributed that stock to IPT in December 1996 in connection with IPT's
formation.
General Partner's Affiliation with CCEP. In 1989, ConCap Partners
defaulted on certain interest payments that were due under the original loan
agreement between the Partnership and ConCap Partners, and ConCap Partners
subsequently filed for reorganization under Chapter 11 of the United States
Bankruptcy Code. In November 1990, as part of ConCap Partners' reorganization
plan, the Partnership and ConCap Partners executed
28
the Loan Agreement and CCEP renewed the deeds of trust on the CCEP Properties.
ConCap Holdings (which is an affiliate of the General Partner) is the sole
general partner of CCEP, and has full discretion with respect to conducting
CCEP's business, including managing the CCEP Properties and initiating and
approving capital expenditures and asset dispositions and obtaining financing
on, or refinancing any CCEP Property. Under the terms of the Loan, any net
proceeds from sales or refinancings of the CCEP Properties are paid to the
Partnership, after payment of a 3% disposition fee to ConCap Holdings (or to
the Partnership with respect to the Partnership's properties).
Previous Tender Offer. In 1997, Xxxxx River Properties, L.L.C. ("Xxxxx
River") acquired 28,833 (or approximately 14.5%) of the outstanding Units, at a
purchase price of $400 per Unit, pursuant to a tender offer commenced in
October 1997. Xxxxx River was affiliated with IPLP, IPT, Insignia and the
General Partner at the time.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and ConCap Holdings and its other affiliates, including
among other things: (i) the Partnership's Limited Partnership Agreement, as
amended to date; (ii) the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1997 and the Partnership's Quarterly Report on Form 10-Q for
the period ended March 31, 1998; (iii) unaudited results of operations of the
Partnership's properties and the CCEP Properties for the period since the
beginning of the Partnership's current fiscal year; (iv) the combined operating
budgets prepared by IRG and ICG with respect to the Partnership's properties
and the CCEP Properties for the year ending December 31, 1998; (v) independent
appraisals of certain of the Partnership's properties and the CCEP Properties;
and (vi) other information obtained by IRG, ICG, Insignia and other affiliates
in their capacities as providers of property management, asset management and
partnership administration services to the Partnership and CCEP. Information on
CCEP and the CCEP Properties is contained in exhibits to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1997 and the
Partnership's Quarterly Report on Form 10-Q for the three month period ended
March 31, 1998. The Purchaser's determination of the Purchase Price was based
on its review and analysis of the foregoing information, the other financial
information and analyses concerning the Partnership summarized below. In
determining the Purchase Price, the Purchaser did not rely upon any material,
non-public information concerning the Partnership not summarized below or
elsewhere in this Offer to Purchase.
Trading History of Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the General Partner, from July 1, 1996
to June 30, 1998 an aggregate of 5,725 Units (representing less than 2.9% of
the total outstanding Units) was transferred (excluding the Units transferred
by Insignia to IPLP in connection with the formation of IPT and the Units
acquired by an affiliate of IPT and Insignia pursuant to a tender offer
commenced in October 1997) in sale transactions. Set forth in the table below
are the high and low sales prices of Units for the quarterly periods from July
1, 1996 to June 30, 1998 as reported by the General Partner and by The
Partnership Spectrum, which is an independent, third-party source. The gross
sales prices reported by The Partnership Spectrum do not necessarily reflect
the net sales proceeds received by sellers of Units, which typically are
reduced by commissions and other secondary market transaction costs to amounts
less than the reported prices; thus the Purchaser does not know whether the
information compiled by The Partnership Spectrum is accurate or complete. The
transfer paperwork submitted to the General Partner often does not include the
requested price information or contains conflicting information as to the
actual sales price; accordingly, Limited Partners should not rely upon this
information as being completely accurate.
29
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
REPORTED SALES PRICES OF PARTNERSHIP UNITS
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(a) THE PARTNERSHIP SPECTRUM(b)
---------------------- ---------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
-------- -------- -------- --------
Fiscal Year Ended December 31, 1998:
Second Quarter.................................... $ 28 $400 $370 $390
First Quarter..................................... 42 390 355 400
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................... 86 400 315 370
Third Quarter ................................... 47 337 300 345
Second Quarter.................................... 100 345 300 363
First Quarter .................................... 10 350 275 355
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... 11 326 270 335
Third Quarter..................................... 11 325 222 325
----------------
(a) Although the General Partner requests and records information on the
prices at which Units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The General Partner processes transfers of Units 12 times
per year - on the first day of each month. The prices in the table are
based solely on information provided to the General Partner by sellers and
buyers of Units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a Limited Partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified
or non-qualified plan, uniform gifts, abandonment of Units or similar non-
sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The Purchaser
(which is an affiliate of the General Partner) does not know whether the
information compiled by The Partnership Spectrum is accurate or complete.
The Purchaser (which is an affiliate of the General Partner) believes
that, although secondary market sales information probably is not a reliable
measure of value because of the limited and inefficient nature of the market
for Units, this information may be relevant to a Limited Partner's decision as
to whether to tender its Units pursuant to the Offer. At present, privately
negotiated sales and sales through intermediaries (e.g., through the trading
system operated by American Partnership Board, Inc., which publishes sell
offers by holders of Units) are the only means available to a Limited Partner
to liquidate an investment in Units (other than the Offer) because the Units
are not listed or traded on any exchange or quoted on NASDAQ.
General Partner's Estimate of Net Asset Value. The General Partner
prepared an estimate of the Partnership's net asset value per Unit in
connection with an offer to purchase up to 4.9% of the outstanding Units
commenced by a party unaffiliated with the Purchaser, IPLP, IPT or Insignia in
July 1998. The General Partner's estimate of the Partnership's net asset value
per Unit as of June 30, 1998 was $619 per Unit. The General Partner estimates
net asset value based on a hypothetical sale of all of the Partnership's
properties and the CCEP Properties and the distribution to the Limited Partners
and the General Partner of the proceeds of such sales, net of related
indebtedness and transaction costs, together with the Partnership's cash,
proceeds from temporary investments, and all other assets that are believed to
have liquidation value, after provision in full for all of the Partnership's
other known liabilities. The net asset value estimate prepared by the General
Partner does not take into account (i) timing considerations or (ii) costs
associated with winding up the Partnership. Therefore, the Purchaser believes
that the General Partner's estimate of net asset value per Unit does not
necessarily represent either the fair market value of a Unit or the amount a
Limited Partner reasonably could expect to receive if the Partnership's
properties or the CCEP Properties were sold and the Partnership was liquidated.
For this reason, the Purchaser considered the General Partner's net asset value
estimate to be less meaningful in determining the Purchase Price than the pro
forma liquidation analysis described below.
Appraisals. Certain of the Partnership's properties and the CCEP
Properties have been appraised in the past several years by independent, third
party appraisers (Xxxxxx X. Xxxxx & Associates, Inc. ("Xxxxx"), Xxxxxx X.
Xxxxxx Company ("Xxxxxx") or E&Y Xxxxxxx Xxxxxxxxx ("E&Y)) in connection with
refinancings of those properties (except for the four appraisals of the
Sterling Apartment Homes and Commerce Center (the 1998 appraisal related to an
initial financing on that property)). According to the appraisal reports, the
scope of the
30
appraisals included an inspection of each property and an analysis of the
respective surrounding markets. In each case, the applicable independent
appraiser relied principally on the income capitalization approach to valuation
and secondarily on the sales comparison approach, and represented that its
report was prepared in accordance with the Code of Professional Ethics and
Standards of Professional Appraisal Practice of the Appraisal Institute and the
Uniform Standards of Professional Appraisal Practice, and in compliance with
the Appraisal Standards set forth in the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 (known as "FIRREA"). The estimated market
values of the fee simple estate of each of the Partnership's properties and the
CCEP Properties specified in the most recent appraisal reports for the
Partnership's properties and the CCEP Properties which have been appraised
within the past three years are set forth in the table below, and copies of the
summaries of those appraisals have been filed as exhibits to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission.
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL APPRAISER
------------- ----- --------- ---------
The Loft Apartments $ 8,200,000 11/07/95 Blake
The Sterling(1) 40,000,000 (2) Xxxxx
$14,500,000 08/01/96 E&Y
$19,250,000 12/22/95 Xxxxxx
$19,250,000 05/12/95 Blake
Indian Creek Village $10,100,000 11/06/95 Blake
The Knolls $11,500,000 11/01/95 Blake
Palm Lake $ 4,100,000 10/15/95 Blake
Plantation Gardens $15,500,000 10/15/95 Blake
Society Park East $ 5,200,000 11/08/95 Xxxxx
Xxxxx Creek Village $ 6,100,000 11/01/95 Xxxxx
------------------
(1) For various reasons, the four appraisals performed on the property
resulted in different valuations, as noted. Each of the appraisals,
except for the 1998 appraisal, was performed prior to commencement of the
major rehabilitation project on the property, and such appraised values
do not reflect the improvements to the property made since that date.
(2) The 1998 written appraisal report is being finalized by Xxxxx, which
estimates the value as noted.
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties and the CCEP
Properties, the Purchaser utilized the capitalization of income approach for
the residential properties and a discounted cash flow analysis for the
commerical property. The estimate of the gross real estate value of the
Partnership's properties and the CCEP Properties prepared by the Purchaser does
not purport to be an estimate of the aggregate fair market value of the Units
themselves, nor should it be viewed as such by Limited Partners. Neither the
Purchaser nor any of its affiliates prepared any estimates of the values of the
Partnership's properties or the CCEP Properties based upon any other valuation
method.
RESIDENTIAL PROPERTIES
The following is a description of the methodology employed by the
Purchaser in preparing such estimates for the residential properties owned by
the Partnership and CCEP (as used below, "net operating income" is calculated
before depreciation, amortization, debt service payments and certain capital
expenditure items):
THE LOFT APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($617,396) generated by the property for the five
months ended May 31, 1998 (comprised of $597,270 of gross rental income and
$20,126 of other income), and then deducted from this amount the total
operating expenses of the property for the first five months of 1998
($236,334), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($381,062). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $914,541, and
then reduced that annualized net operating income amount by $300 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for
31
valuation purposes. Finally, the Purchaser capitalized its estimated adjusted
net operating income amount ($858,141) at a 10% capitalization rate, resulting
in an estimated gross property value of $8,581,410.
INDIAN CREEK VILLAGE APARTMENTS. In estimating the value of this
property, the Purchaser reviewed the income ($883,390) generated by the
property for the five months ended May 31, 1998 (comprised of $823,886 of gross
rental income and $59,504 of other income), and then deducted from this amount
the total operating expenses of the property for the first five months of 1998
($431,928), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($451,462). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,083,500.
Finally, the Purchaser capitalized its estimated annual net operating income
amount at a 10% capitalization rate, resulting in an estimated gross property
value of $10,835,000.
THE KNOLLS APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($833,081) generated by the property for the five
months ended May 31, 1998 (comprised of $778,663 of gross rental income and
$54,418 of other income), and then deducted from this amount the total
operating expenses of the property for the first five months of 1998
($254,414), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($578,667). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,388,790, and
then reduced that annualized net operating income amount by $500 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($1,257,790) at a 10.5% capitalization rate, resulting in an estimated
gross property value of $11,978,952.
MAGNOLIA TRACE APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($546,429) generated by the property for the
five months ended May 31, 1998 (comprised of $520,971 of gross rental income
and $25,458 of other income), and then deducted from this amount the total
operating expenses of the property for the first five months of 1998
($270,706), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($275,723). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $661,730, and
then reduced that annualized net operating income amount by $300 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($587,930) at a 10% capitalization rate, resulting in an estimated gross
property value of $5,879,300.
PALM LAKE APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($440,022) generated by the property for the five
months ended May 31, 1998 (comprised of $417,437 of gross rental income and
$22,585 of other income), and then deducted from this amount the total
operating expenses of the property for the first five months of 1998
($217,981), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($222,041). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $532,894, and
then reduced that annualized net operating income amount by $200 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($502,894) at a 10% capitalization rate, resulting in an estimated gross
property value of $5,028,940.
PLANTATION GARDENS APARTMENTS. In estimating the value of this
property, the Purchaser reviewed the income ($1,253,668) generated by the
property for the five months ended May 31, 1998 (comprised of $1,174,564 of
gross rental income and $79,104 of other income), and then deducted from this
amount the total operating expenses of the property for the first five months
of 1998 ($642,305), resulting in the Purchaser's estimate of net operating
income for the first five months of 1998 ($611,363). The Purchaser then
annualized this amount, resulting in estimated annual net operating income of
$1,467,259, and then increased that annualized net operating income amount by
$200 per apartment unit, representing the Purchaser's estimate of the
adjustment that would be imputed by a third party purchaser in underwriting the
operating expenses, including normal replacement reserves, of the property for
valuation purposes. Finally, the Purchaser capitalized its estimated adjusted
net operating income amount ($1,541,659) at a 10% capitalization rate,
resulting in an estimated gross property value of $15,416,590.
32
REGENCY OAKS APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($897,870) generated by the property for the five
months ended May 31, 1998 (comprised of $841,953 of gross rental income and
$55,917 of other income), and then deducted from this amount the total
operating expenses of the property for the first five months of 1998
($510,045), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($387,825). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $930,773.
Finally, the Purchaser capitalized its estimated annual net operating income
amount at a 10.5% capitalization rate, resulting in an estimated gross property
value of $8,864,505.
SHIREWOOD TOWNHOMES APARTMENTS. In estimating the value of this
property, the Purchaser reviewed the income ($419,701) generated by the
property for the five months ended May 31, 1998 (comprised of $396,159 of gross
rental income and $23,542 of other income), and then deducted from this amount
the total operating expenses of the property for the first five months of 1998
($271,004), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($148,697). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $356,870.
Finally, the Purchaser capitalized its estimated annual net operating income
amount at a 12% capitalization rate, resulting in an estimated gross property
value of $2,973,917.
SILVERADO APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($514,817) generated by the property for the five
months ended May 31, 1998 (comprised of $483,453 of gross rental income and
$31,364 of other income), and then deducted from this amount the total
operating expenses of the property for the first five months of 1998
($283,644), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($231,173). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $554,811, and
then reduced that annualized net operating income amount by $100 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($530,011) at an 11% capitalization rate, resulting in an estimated
gross property value of $4,818,282.
SOCIETY PARK APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($734,172) generated by the property for the five
months ended May 31, 1998 (comprised of $687,551 of gross rental income and
$46,621 of other income), and then deducted from this amount the total
operating expenses of the property for the first five months of 1998
($423,646), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($310,526). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $745,256, and
then reduced that annualized net operating income amount by $200 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($680,456) at a 10.5% capitalization rate, resulting in an estimated
gross property value of $6,480,533.
SOCIETY PARK EAST APARTMENTS. In estimating the value of this
property, the Purchaser reviewed the income ($524,783) generated by the
property for the five months ended May 31, 1998 (comprised of $501,236 of gross
rental income and $23,547 of other income), and then deducted from this amount
the total operating expenses of the property for the first five months of 1998
($270,035), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($254,748). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $611,390, and
then reduced that annualized net operating income amount by $300 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($551,390) at a 10.5% capitalization rate, resulting in an estimated
gross property value of $5,251,333.
TATES CREEK VILLAGE APARTMENTS. In estimating the value of this
property, the Purchaser reviewed the income ($547,820) generated by the
property for the five months ended May 31, 1998 (comprised of $509,855 of gross
rental income and $37,965 of other income), and then deducted from this amount
the total operating expenses of the property for the first five months of 1998
($351,671), resulting in the Purchaser's estimate of net operating income for
the first five months of 1998 ($196,149). The Purchaser then annualized this
amount, resulting
33
in estimated annual net operating income of $470,754, and then increased that
annualized net operating income amount by $600 per apartment unit, representing
the Purchaser's estimate of the adjustment that would be imputed by a third
party purchaser in underwriting the operating expenses, including normal
replacement reserves, of the property for valuation purposes. Finally, the
Purchaser capitalized its estimated adjusted net operating income amount
($593,754) at a 10.5% capitalization rate, resulting in an estimated gross
property value of $5,654,800.
THE STERLING APARTMENT HOMES AND COMMERCE CENTER. Based on the most
recent appraisal performed by an independent appraiser in connection with an
initial financing of the property, the combined value of the residential and
commercial portions of the property is estimated to be approximately
$40,000,000. Accordingly, for purposes of this valuation, the Purchaser has
determined the value of the property to be $40,000,000.
COMMERCIAL PROPERTY
The following is a description of the methodology employed by the
Purchaser in preparing the estimate of the value of the commercial property
owned by CCEP:
444 DEHARO. In estimating the value of this property, the Purchaser
performed the following analysis. The Purchaser calculated estimated annual
cash flow through December 31, 2007 based on various assumptions, including,
among others, (i) market rents at various points in time, as adjusted for
inflation, (ii) lease expiration dates and renewal rates for existing tenants,
(iii) tenant improvement allowances for new leases and lease renewals and (vi)
length of new leases. The Purchaser, in order to arrive at a present value of
the estimated annual cash flows for years one through ten, utilized the
estimated annual cash flow for year one and applied a discount rate of 12% in
order to determine the present value of the estimated annual cash flows for
each of years two through ten. Next, the Purchaser capitalized the estimated
net operating income amount for each of years one through ten at a 10%
capitalization rate, then subtracted 3% for estimated sale transaction costs,
resulting in an estimated net liquidation value for the property for each of
years one through ten. The Purchaser, in order to arrive at a present value of
the estimated net liquidation value for years one through ten, utilized the
estimated net liquidation value for year one and applied a discount rate of 12%
in order to determine the present value of the estimated net liquidation values
for each of years two through ten. The Purchaser then calculated an annual
property value for each of the ten years based on the sum of the present values
of (A) estimated cash flow and (B) estimated net liquidation value. Finally,
the Purchaser totalled the annual property values for each of the ten years and
then divided that amount by ten, resulting in an estimated property value of
$12,946,509.
* * *
Based on the individual estimates of the gross values of the
Partnership's properties and the CCEP Properties described above, the Purchaser
estimated that the current aggregate gross real estate value of the
Partnership's properties and the CCEP Properties is $144,710,071 (the "Gross
Real Estate Value Estimate"). The property-specific capitalization rates used
by the Purchaser in the valuation estimates described above were based upon the
Purchaser's, IPT's and Insignia's general knowledge of the revenues and
expenses associated with operating multi-family and commercial properties in
the markets in which the Partnership's properties and the CCEP Properties are
located, their general knowledge of property values in those markets and their
experience in the real estate market in general.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that these approaches
represent reasonable methods of estimating the aggregate gross value of the
Partnership's properties and the CCEP Properties (without taking into account
the costs of disposing of the Partnership's and CCEP's multi-family
properties), subject to the substantial uncertainties inherent in any estimate
of value. The use of other assumptions, however, particularly as to the
applicable capitalization rate, could produce substantially different results.
In valuing the commercial property owned by CCEP, the Purchaser employed a
discounted cash flow analysis based on software programs traditionally used and
determined as reasonable by others in the industry, such as "Argus" or
"Project." This method relies on a number of assumptions, including, among
others, (i) rental rates for new leases and lease renewals, (ii) tenant
improvement allowances for new leases and lease renewals, (iii) broker's
commissions, (iv) lease periods, (v) capital expenditures and (vi) discount
rates applied
34
to future cash flows. The use of assumptions or variables that differ from
those described above, particularly the applicable discount rate, could produce
substantially different results. None of the Purchaser, IPT or Insignia
solicited any offers or inquiries from prospective buyers of the Partnership's
properties and the CCEP Properties in connection with preparing the Purchaser's
estimates of the fair market values of those properties, and the actual amounts
for which the Partnership's properties and the CCEP Properties might be sold
could be significantly higher or significantly lower than the Purchaser's
estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the third party debt (which is senior to the Loan) encumbering the
Partnership's properties and the CCEP Properties or the other liabilities of
the Partnership and CCEP, (ii) cash and other assets held by the Partnership
and CCEP, (iii) real estate transaction costs that would be incurred on a sale
of the Partnership's or CCEP's multi-family properties, such as brokerage
commissions and other selling and closing expenses, (iv) timing considerations
or (v) costs associated with winding up the Partnership and CCEP. For this
reason, the Purchaser considers the Gross Real Estate Value Estimate to be less
meaningful in evaluating the Purchase Price offered by the Purchaser than its
pro forma estimate of the net liquidation value per Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, which are a relatively illiquid
investment, and is not offering to purchase the Partnership's underlying assets
or assume any of its liabilities. Consequently, the Purchaser does not believe
that the per-Unit amount which might be distributed to Limited Partners
following a future sale of all the Partnership's properties or the CCEP
Properties necessarily reflects the present fair value of a Unit. Conversely,
the realizable value of the Partnership's assets clearly is a relevant factor
in determining the price a prudent purchaser would offer for Units.
The Loan held by the Partnership is not typical of the kinds of loans
traded in the secondary loan markets. Loans generally are traded at prices that
reflect the yield the purchaser expects to realize from scheduled payments
(including payments due at maturity) on the purchased loans. Because the Loan
is unusual, the Purchaser believes a conventional loan valuation analysis is
probably not a realistic approach to valuation. The Purchaser believes a
purchaser of the Loan more likely would view the Loan as approximately
equivalent to outright ownership of the CCEP Properties, because the
outstanding principal amount of the Loan, approximately $297,986,000 as of
March 31, 1998, including interest accrued and added to principal pursuant to
the terms of the Loan exceeds the Purchaser's estimate of the aggregate gross
property value of the CCEP Properties ($96,128,661 as of July 30). It is very
unlikely that CCEP would voluntarily transfer title to the CCEP Properties any
earlier than that, even though the aggregate indebtedness under the Loan
exceeds the value of the CCEP Properties by a large amount, because disposition
of the CCEP Properties will have substantial adverse tax consequences for the
partners in CCEP. Any disposition of the CCEP Properties would result in net
cash proceeds, after repayment of the Senior Mortgage Indebtedness and payment
of transaction expenses and other costs of sale. Indeed, it is possible that
CCEP might seek bankruptcy protection when the Loan matures and becomes
repayable in full, simply in order to further postpone the adverse tax
consequences associated with disposition of the CCEP Properties. Accordingly,
while the pro forma liquidation analysis described below reflects an approach
that may be relevant in evaluating the Purchaser's Offer, the Purchaser
believes the Estimated Liquidation Value per Unit does not accurately reflect
the current fair market value per Unit.
In performing this analysis, the Purchaser made a pro forma
calculation of the amount each Limited Partner might receive in a theoretical
orderly liquidation of the Partnership (which may not be realistically
possible, particularly in the near term, due to real estate market conditions,
the general difficulty of disposing of real estate in a short period of time,
and other general economic factors), based on the Gross Real Estate Value
Estimate described above, the assumption that the Loan could be sold for an
aggregate price equal to the value of the aggregate value of the CCEP
Properties, and the other considerations described below. The Purchaser based
its pro forma liquidation analysis on the Gross Real Estate Value Estimate (and
thus on the Purchaser's estimates of the values of the Partnership's properties
and the CCEP Properties, described above), as opposed to the appraised values
of those properties or the General Partner's net asset value estimate (each, as
described above), because the Purchaser believes that the Gross Real Estate
Value Estimate represents the best estimate, based on currently available
information, of the values of the Partnership's properties and the CCEP
Properties.
35
In estimating the pro forma net liquidation value per Unit, the
Purchaser adjusted its Gross Real Estate Value Estimate of $144,710,071 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses and security deposits). Specifically, the Purchaser added the
amounts of cash, accounts receivable and escrow deposits shown on the
Partnership's and CCEP's unaudited balance sheets at June 30, 1998
($15,994,799), and subtracted the mortgage debt encumbering the Partnership's
directly-owned properties ($4,422,116) and the Senior Mortgage Indebtedness
encumbering the CCEP Properties ($22,996,055) and all other liabilities shown
on the balance sheets of the Partnership and CCEP ($2,989,262). The Purchaser
then deducted from that amount $2,635,271, representing a reserve equal to 2%
of the gross real estate value of the multi-family properties owned by the
Partnership and CCEP (which represents the Purchaser's estimate of the probable
costs of real estate transfer taxes and other disposition expenses). Such
expenses were factored into the Purchaser's calculation of the value of the
commercial property owned by CCEP (as described herein). The result,
$127,662,166, represents the Purchaser's pro forma estimate of the aggregate
net liquidation proceeds (before provision for the costs described in the
following sentence) which could be realized on an orderly liquidation of the
Partnership, based on the assumptions implicit in the calculations described
above. The Purchaser did not, however, deduct any amounts in respect of the
legal and other costs which the Purchaser expects would be incurred in a
liquidation, including the cost of exercising rights as a mortgagee under the
Loan or costs of negotiating purchase and sale contracts, possibly conducting a
consent solicitation in order to obtain the Limited Partners' approvals for the
sales as may be required by the Limited Partnership Agreement, and winding up
the Partnership, because of the difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser then
deducted $4,341,302 (which represents the 3% non-subordinated disposition fee
payable to the General Partner upon a sale of the Partnership's properties and
to ConCap Holdings upon a sale of the CCEP Properties), resulting in net
aggregate liquidation proceeds of $123,320,864. The Purchaser then deducted 1%
which is the percentage allocable to the General Partner in respect of its
non-subordinated interest in the Partnership, and the remaining $122,087,655
was then divided by the 199,052 Units reported as outstanding by the General
Partner as of July 1, 1998. The resulting estimated pro forma liquidation value
was $613.35 per Unit (the "Estimated Liquidation Value"), before provision for
the legal and other costs of liquidating the Partnership described in the last
sentence of the preceding paragraph.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Units because
(i) there is no assurance that any such liquidation in fact will occur in the
foreseeable future, (ii) any such liquidation prior to the currently-scheduled
maturity of the Loan on November 15, 2000 would require the consent of the
partners in CCEP, and the Purchaser believes those partners would not consent
because of the substantially adverse tax consequences of such a liquidation to
those partners and (iii) any liquidation in which the estimated fair market
values described above might be realized would take an extended period of time
(at least a year, and quite possibly significantly longer), during which time
the Partnership and its partners would continue to be exposed to the risk of
fluctuations in asset values because of changing market conditions and other
factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Units is substantially less than its estimate of the Estimated Liquidation
Value. Conversely, there is a substantial possibility that the per-Unit value
realized in an orderly liquidation could be greater than the Estimated
Liquidation Value. A reduction in either operating expenses or capital
expenditures from the levels in the property value calculations above would
result in a higher liquidation value under the method described above.
Similarly, a higher liquidation value would result if a buyer applied lower
capitalization rates (reflecting a willingness to accept a lower rate of return
on its investment) to the applicable net operating income generated by the
Partnership's properties and the CCEP Properties than the capitalization rates
applied by the Purchaser. For example, a 5% increase or decrease in the value
of the Partnership's properties and the CCEP Properties would produce a
corresponding increase or decrease in the Estimated Liquidation Value of
approximately $34 per Unit. Furthermore, the analysis described above is based
on a series of assumptions, some of which may not be correct. Accordingly, this
analysis should be viewed merely as indicative of the Purchaser's approach to
valuing Units and not as any way predictive of the likely result of any future
transactions.
36
Litigation. On March 24, 1998, certain persons claiming to own limited
partner interests in certain limited partnerships (including the Partnership)
whose general partners (the "General Partners") are affiliates of Insignia (the
"Partnerships") filed a purported class and derivative action in California
Superior Court in the County of San Mateo (the "Complaint") against Insignia,
the General Partners (including the General Partner), certain persons and
entities who purportedly formerly controlled the General Partners, and
additional entities affiliated with and individuals who are officers, directors
and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached their
fiduciary duties to the plaintiffs by selling or agreeing to sell their
"fiduciary positions" as stockholders, officers and directors of the General
Partners for a profit and retaining said profit rather than distributing it to
the plaintiffs; (ii) the defendants breached their fiduciary duties by
mismanaging the Partnerships and misappropriating the assets of the
Partnerships by (a) manipulating the operations of the Partnerships to depress
the trading price of limited partnership units (the "Units") of the
Partnerships; (b) coercing and fraudulently inducing unitholders to sell Units
to certain of the defendants at depressed prices; and (c) using the voting
control obtained by purchasing Units at depressed prices to entrench certain of
the defendants' positions of control over the Partnerships; and (iii) the
defendants breached their fiduciary duties to the plaintiffs by (a) selling
assets of the Partnerships such as mailing lists of unitholders; and (b)
causing the General Partners to enter into exclusive arrangements with their
affiliates to sell goods and services to the General Partners, the unitholders
and tenants of Partnership properties. The complaint also alleges that the
foregoing allegations constitute violations of various California securities,
corporate and partnership statutes, as well as conversion and common law fraud.
The complaint seeks unspecified compensatory and punitive damages, an
injunction blocking the sale of control of the General Partners to AIMCO and a
court order directing the defendants to discharge their fiduciary duties to the
plaintiffs. As of the date of this Offer to Purchase, defendants have not
served or filed a reply to the complaint. IPT and Insignia believe that the
allegations contained in the Complaint are without merit and intend to
vigorously contest the plaintiffs' action.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
the Offer, the Purchaser (which is an affiliate of the General Partner) will
not be required to accept for payment or to pay for any Units tendered if all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been obtained
prior to the Expiration Date. Furthermore, notwithstanding any other term of
the Offer and in addition to the Purchaser's right to withdraw the Offer at any
time before the Expiration Date, the Purchaser (which is an affiliate of the
General Partner) will not be required to accept for payment or pay for any
Units not theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Units if, at any time on or after the date of the
Offer and before the Expiration Date, any of the following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the Offer
or the acceptance for payment, purchase of or payment for any Units by the
Purchaser (which is an affiliate of the General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units, including without limitation the right
to vote any Units acquired by the Purchaser pursuant to the Offer or otherwise
on all matters properly presented to the Partnership's Limited Partners, (iii)
requires divestiture by the Purchaser of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as a result of the
transactions contemplated by the Offer, or (v) might materially adversely
affect the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Purchaser or the
Partnership;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
37
prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of, or
imposition of a limitation on, the markets thereof, or (vi) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i) more
than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act), or (ii) any person or group that prior to such
date had filed a Statement with the Commission pursuant to Section 13(d) or (g)
of the Exchange Act has increased or proposes to increase the number of Units
beneficially owned by such person or group as disclosed in such Statement by
two percent or more of the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or may
be waived by the Purchaser in whole or in part at any time and from time to
time in its sole discretion. Any determination by the Purchaser (which is an
affiliate of the General Partner) concerning the events described above will be
final and binding upon all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser (which is an affiliate of the General Partner)
is not aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Units by the Purchaser (which is an affiliate of the General
Partner) pursuant to the Offer, other than the filing of a Tender Offer
Statement on Schedule 14D-1 with the Commission (which has already been filed)
and any required amendments thereto. Should any such approval or other action
be required, it is the Purchaser's present intention that such additional
approval or action would be sought. Although there is no present intent to
delay the purchase of Units tendered pursuant to the Offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the Partnership's business, or that certain parts of the
Partnership's business might not have to be disposed of or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser (which is an affiliate of the General Partner)
to elect to terminate the Offer without purchasing Units thereunder.
Antitrust. The Purchaser (which is an affiliate of the General
Partner) does not believe that the Xxxx-Xxxxx- Xxxxxx Antitrust Improvements
Act of 1976, as amended, is applicable to the acquisition of Units contemplated
by the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
38
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section 16,
the Purchaser (which is an affiliate of the General Partner) will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Units pursuant to the Offer. The Purchaser (which is an affiliate of
the General Partner) has retained Beacon Hill Partners, Inc. to act as
Information Agent and Xxxxxx Trust Company of New York to act as Depositary in
connection with the Offer. The Purchaser (which is an affiliate of the General
Partner) will pay the Information Agent and the Depositary reasonable and
customary compensation for their respective services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and has agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection therewith, including liabilities under the federal
securities laws. The Purchaser (which is an affiliate of the General Partner)
will also pay all costs and expenses of printing and mailing the Offer and its
legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser (which is an affiliate of the
General Partner) is not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If the Purchaser (which is an
affiliate of the General Partner) becomes aware of any jurisdiction in which
the making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, the Purchaser (which is an affiliate of the General
Partner) cannot comply with any such law, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) Limited Partners residing in
such jurisdiction. In those jurisdictions whose securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser (which is an affiliate of the
General Partner) by one or more registered brokers or dealers licensed under
the laws of that jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the General
Partner) not contained in this Offer to Purchase or in the Assignment of
Partnership Interest and, if given or made, such information or representation
must not be relied upon as having been authorized.
The Purchaser (which is an affiliate of the General Partner), IPLP,
IPT and Insignia have filed with the Commission a Tender Offer Statement on
Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same places and in
the same manner as set forth in Section 9 (except that they will not be
available at the regional offices of the Commission).
XXXXXX RIVER PROPERTIES, L.L.C.
JULY 30, 1998
39
SCHEDULE I
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the managers of the Purchaser. Each
person identified below is employed by Xxxxxxxx and is a United States citizen.
The principal business address of the Purchaser and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has been a Manager of the
000 Xxxx Xxxxxx Xxxxxxxxx since its inception in July 1998. For
Suite 3401 additional information regarding Xx. Xxxxx, see
New York, NY 10152 Schedule II.
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx has been a Manager of the
000 Xxxx Xxxxxx Purchaser since July 1998. For additional
New York, NY 10166 information regarding Xx. Xxxxxxx, see Schedule
III.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has been a Manager of the Purchaser
since its inception in July 1998. For additional
information regarding Xx. Xxxxxx, see Schedules II
and III.
S-1
SCHEDULE II
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the trustees and executive officers
of IPT. Each person identified below is employed by Xxxxxxxx and is a United
States citizen. The principal business address of IPT and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29602. Trustees are
identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has served as a Trustee of IPT
000 Xxxx Xxxxxx and as Chairman of the Board of Trustees and Chief
Suite 3401 Executive Officer of IPT since December 1996. For
New York, NY 10152 additional information regarding Xx. Xxxxxx, see
Schedule III.
Xxxxx X. Xxxxx* Xxxxx X. Xxxxx has served as a Trustee of IPT
since its inception in May 1996, and has served as
President and Director of IPT since December 1996.
For additional information regarding Xx. Xxxxx,
see Schedule III.
Xxxxx X. Xxxxxxxx* Xxxxx X. Xxxxxxxx has served as a Trustee of IPT
000 Xxxxxxxx Xxxxxxxxx since December 1996. Xx. Xxxxxxxx has also served
Suite 400 as an Executive Managing Director of IPT since
Nashville, TN 37205 December 1996. For additional information
regarding Xx. Xxxxxxxx, see Schedule III.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as a Senior Vice
000 Xxxx Xxxxxx President of IPT since August 1997, and has served
Suite 3401 as Secretary of IPT since January 1998. From June
New York, NY 10152 until August 1997, Xx. Xxxxx served as a Vice
President of IPT. Since April 1997, Xx. Xxxxx'x
principal occupation has been to serve as a Senior
Vice President -- Investment Banking of Insignia.
Prior to April 1997, Xx. Xxxxx'x principal
occupation was as an attorney with the law firm of
Xxxxxx & Xxxxx, New York, New York.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as the Controller of
IPT since August 1997. Since April 1995, Mr.
Xxxxx' principal occupation has been to serve as
an accountant with Insignia. Prior to April 1995,
Mr. Xxxxx' principal occupation was as a senior
auditor with the accounting firm of Ernst &
Young LLP.
Xxxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxxx, Xx. has served as a Senior
Vice President of IPT since August 1997, and
served as Vice President and Director of
Operations of IPT from December 1996 until August
1997. Xx. Xxxxxxx'x principal employment has been
with Insignia for more than the past five years.
From January 1994 to September 1997, Xx. Xxxxxxx
served as Managing Director-- Partnership
Administration of Insignia.
S-2
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has served as Vice President and
Treasurer of IPT since December 1996. Xx. Xxxxxx
served as a Vice President of IPT from December
1996 until August 1997 and as Chief Financial
Officer of IPT from May 1996 until December 1996.
For additional information regarding Xx. Xxxxxx,
see Schedule III.
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has served as Chief Operating
Officer of IPT since May 1997. Since August 1994,
Xx. Xxxxxx'x principal occupation has been to
serve as President of the various corporate
general partners of partnerships controlled by
Metropolitan Asset Enhancement, L.P., which is an
affiliate of Insignia.
S-3
SCHEDULE III
INFORMATION REGARDING THE
DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the directors and executive
officers of Insignia. Unless otherwise indicated, each person identified below
is employed by Insignia and is a United States citizen. The principal business
address of Insignia and, unless otherwise indicated, the business address of
each person identified below, is One Insignia Financial Plaza, Xxxxxxxxxx,
Xxxxx Xxxxxxxx 00000. Directors are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has been a Director of Insignia
000 Xxxx Xxxxxx since its inception in July 1990. Xx. Xxxxxx has
Suite 3401 been Chairman and Chief Executive Officer of
New York, NY 10152 Insignia since January 1991 and President since
May 1995. Xx. Xxxxxx has also been President of
Metropolitan Asset Group, Ltd. ("MAG"), a real
estate investment banking firm, since 1983.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of Insignia
0000 Xxxxx Xxxxxx Xxxxx since May 1996. For more than the past five years,
Santa Fe, NM 87501 Xx. Xxxxxxx'x principal occupation has been as a
General Partner of First Security Company II,
L.P., an investment advisory firm.
Xxxxx X. Xxxxxx* Xxxxx X. Xxxxxx has been a Director of Insignia
000 Xxxx Xxxxxx since August 1993. Xx. Xxxxxx is the retired
New York, NY 10021 Chairman of the Board and Chief Executive Officer
of Xxxxxxxxx'x Inc., a real estate company. He
also serves as a director of Refac Technology
Development Corporation, Noodle Kiddoodle, and
Containerways International Ltd.
Xxxxxx X. Xxxx* Xxxxxx X. Xxxx has been a Director of Insignia
000 Xxxx 00xx Xxxxxx since August 1993. Since February 1996, Xx. Xxxx
New York, NY 10019 has been a partner in the law firm of Akin, Gump,
Strauss, Xxxxx & Xxxx, which represents Insignia
and certain of its affiliates from time to time.
From January 1991 to February 1996, Xx. Xxxx was a
partner in the law firm LeBoeuf, Lamb, Xxxxxx &
XxxXxx.
Xxxxxxx X. Xxxxxxxx* Xxxxxxx X. Xxxxxxxx has been a Director of
000 Xxxx 00xx Xxxxxx Insignia since August 1993. For more than the past
New York, NY 10022 five years, Xx. Xxxxxxxx'x principal occupation
has been as a self-employed consultant in the real
estate business, including ownership, management
and lending.
Xxxxx X. Aston Xxxxx X. Aston's principal employment has been
with Insignia for more than the past five years.
Xx. Xxxxx currently serves as Chief Financial
Officer of Insignia (since August 1996), with the
Office of the Chairman (since July 1994) and
Executive Managing Director of Investment Banking
of Insignia (since January 1991).
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx'x principal employment has been
0000 Xxxxxxxx Xxxxx Xxxx. with Realty One, Inc., a wholly-owned subsidiary
Cleveland, OH 44131 of Insignia ("Realty One"), for more than the past
five years. Xx. Xxxxx currently serves as Chairman
and Chief Executive Officer of Realty One (since
October 1997).
S-4
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxxx X. Xxxxxxx Xx. Xxxxxxx currently serves as a Director and
0000 Xxxxxxxx Xxxxx Xxxx. Chief Operating Officer of Realty One (since
Cleveland, OH 44131 October 1997). From 1994 to 1997, Xx. Xxxxxxx was
the President of Realty One. Prior to 1994, Xx.
Xxxxxxx was the Chief Financial Officer and
Executive Vice President of Xxxxxxxx, Inc., a full
service advertising agency.
Xxxx X.X. Xxxxxxxxx Xxxx X.X. Xxxxxxxxx'x principal employment has
Berkeley Square House been with Xxxxxxx Xxxxx for more than the past
London W1X 6AN five years. Xx. Xxxxxxxxx currently serves as a
England Managing Director of Insignia for Xxxxxxx Xxxxx
(since Insignia's acquisition of Xxxxxxx Xxxxx in
1998) and has been a director of Xxxxxxx Xxxxx
since its inception in 1997. Xx. Xxxxxxxxx is a
citizen of the United Kingdom.
Xxxxxx X. Xxxxxx Xxxxxx Xxxxxx has been a Senior Vice President --
Human Resources of Insignia since August 1997.
Prior to August 1997, Xx. Xxxxxx'x principal
employment for more than the prior five years was
as Director -- Human Resources of E&Y Xxxxxxx
Xxxxxxxxx Real Estate Group, New York, New York.
Xxxx X. Xxxxxxxx Xxxx X. Xxxxxxxx'x principal employment has been
Berkeley Square House with Xxxxxxx Xxxxx for more than the past five
London W1X 6AN years. Xx. Xxxxxxxx currently serves as Chief
England Executive Officer of Xxxxxxx Xxxxx (since
Insignia's acquisition of Xxxxxxx Xxxxx in 1998).
Xx. Xxxxxxxx is a citizen of the United Kingdom.
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx'x principal employment has been
000 Xxxxxxxx Xxxxxxxxx with Insignia for more than the past five years.
Suite 400 Xx. Xxxxxxxx currently serves as an Executive
Nashville, TN 37205 Managing Director of Insignia (since July 1994)
and as President of Insignia Financial Services, a
division of Insignia (since July 1994).
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx has been General Counsel and
000 Xxxx Xxxxxx Secretary of Insignia since March 1998. Prior to
New York, NY 10166 that time, Xx. Xxxxxxx'x principal occupation was
as a partner with the law firm of Nixon, Hargrave,
Devans & Xxxxx, LLP, New York, New York.
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx'x principal employment has
000 Xxxx Xxxxxx been with Insignia for more than the past five
New York, NY 10166 years. Xx. Xxxxxxxx currently serves as a Managing
Director -- Investment Banking of Insignia (since
July 1994).
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx has been with the Office of the
000 Xxxx Xxxxxx Chairman of Insignia and has been Chairman of
New York, NY 10166 Insignia/ESG, Inc. since July 1996. Prior to July
1996, Xx. Xxxxxx'x principal employment for more
than the prior five years was as a founder and
Chairman of Xxxxxx X. Xxxxxx Company, Incorporated
("ESG"), a commercial property management and
brokerage firm located in New York, New York that
was acquired by Insignia in June 1996.
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx'x principal employment has been
with Insignia for more than the past five years.
Xx. Xxxxxxx currently serves as a Senior Vice
President of Insignia (since July 1994) and as
Chief Information Officer of Insignia (since
January 1991).
S-5
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X.X. Xxxxxxx Xxxxxx X.X. Xxxxxxx Xxxxxx Xxxxxxx'x principal
Berkeley Square House employment has been with Xxxxxxx Xxxxx Berkeley
London W1X 6AN Square House Group Limited, a wholly-owned U.K.
England subsidiary of Insignia ("Xxxxxxx Xxxxxx W1X 6AN
Xxxxx"), for more than the past five years. Xx.
Xxxxxxx currently serves England as Chairman of
Xxxxxxx Xxxxx (since Insignia's acquisition of
Xxxxxxx Xxxxx in 1998). Xx. Xxxxxxx is a citizen
of the United Kingdom.
Xxxx Xxxxxxx Xxxx Xxxxxxx has been an Executive Managing
000 Xxxxx Xxxxxx Director of Insignia since September 1995 and
New York, NY 10022 President of Insignia Residential Group since
September 1997. Xx. Xxxxxxx has also served as
President of Insignia Management Services -- New
York, Inc., a subsidiary of Insignia, since
September 1995. Prior to September 1995, Xx.
Xxxxxxx'x principal occupation was to serve as
President and Chief Executive Officer of Xxxxxxx
Company, Inc., a residential property management
firm located in New York, New York which Insignia
acquired in September 1995.
Xxxxxx Xxxx Xxxxxx Xxxx has been a Senior Vice President --
Finance of Insignia since January 1997 and
Controller of Insignia since June 1994. Prior to
June 1994, Xx. Xxxx was Senior Vice President and
Controller of The First Savings Bank, FSB located
in Greenville, South Carolina.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx'x principal employment has been
with Insignia for more than the past five years.
Xx. Xxxxxx currently serves as Chief Operating
Officer of Insignia Residential Group (since
January 1997).
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has been a Managing Director of
000 Xxxx Xxxxxx Insignia since June 1996, President of Insignia
New York, NY 10166 Commercial Group since January 1997 and President
of Insignia/ESG, Inc. since June 1996. From
February 1992 until July 1996, Xx. Xxxxxx'x
principal employment was as President of ESG. Xx.
Xxxxxx currently serves as a Director of Liberty
Property Trust and Tower Realty, Inc.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx'x principal employment has been with
Insignia for more than the past five years. Xx.
Xxxxxx currently serves as Chief Operating Officer
(since August 1996) and Treasurer (since January
1992) of Insignia. Xx. Xxxxxx has also served as
the Chief Financial Officer and Controller of MAG
since September 1990.
S-6
SCHEDULE IV
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Johnstown/Consolidated Income Partners
Multi-Benefit Realty Fund 87-1
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Growth Fund XXII
Fox Strategic Housing Income Partners
Davidson Growth Plus, X.X.
Xxxxxxxx Diversified Real Estate II, X.X.
Xxxxxxxx Income Real Estate, L.P.
HCW Pension Real Estate Fund
Angeles Income Properties, Ltd. II
Angeles Income Properties, Ltd. IV
Angeles Income Properties, Ltd. 6
Angeles Opportunity Properties, Ltd.
Angeles Partners IX
Angeles Partners XII
S-7
Manually signed facsimile copies of the Assignment of Partnership
Interest will be accepted. The Assignment of Partnership Interest and any other
required documents should be sent or delivered by each Limited Partner or such
Limited Partner's broker, dealer, bank, trust company or other nominee to the
Depositary as set forth below.
The Depositary for the Offer is:
XXXXXX TRUST COMPANY OF NEW YORK
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (000) 000-0000 (212) 701-0000 Xxxx Xxxxxx Plaza
P.O. Box 0000 00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 Xxx Xxxx, Xxx Xxxx 00000
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at its telephone number and address listed below. You may
also contact your broker, dealer, bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
(Toll Free)
(000) 000-0000
(Call Collect)
