UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13-E3
RULE 13E-3 TRANSACTION STATEMENT UNDER SECTION 13(e)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ___)
DECADE COMPANIES INCOME PROPERTIES-A LIMITED PARTNERSHIP
________________________________________________________________
(Name of the Issuer)
DECADE COMPANIES INCOME PROPERTIES-A LIMITED PARTNERSHIP
JEFFERY L. KEIERLEBER
____________________________________________________________________________
(Name of Persons Filing Statement)
Limited Partnership Interests
____________________________________________________________________________
(Title of Class of Securities)
N/A
________________________________________________________________
(CUSIP Number of Class of Securities)
Mr. Michael Sweet
Decade Companies Income Properties
N19 W24130 Riverwood Dr., Suite 100
Waukesha WI 53188
(262) 522-8990
Copy to:
Conrad G. Goodkind, Esq.
Walter J. Skipper, Esq.
Quarles & Brady LLP
411 East Wisconsin Ave.
Milwaukee, WI 53202
(414) 277-5000
(Name, Address, and Telephone Numbers of Persons Authorized to Receive Notices
and Communications on Behalf of Persons Filing Statement)
This statement is filed in connection with (check the appropriate box):
[ ]The filing of solicitation materials or an information statement subject to
Regulation (Section Section 240.14a-1 through 240.14b-2), Regulation 14C
(Section Section 240.14c-1 through 240.14c-101) or 13e-3(c)
(Section 240.13e-3(c)) under the Securities Exchange Act of 1934 ("the Act").
[ ] The filing of a registration statement under the Securities Act of 1933.
[ X ] A tender offer.
[ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ ]
Check the following box if the filing is a final amendment reporting the results
of the transaction: [ ]
CALCULATION OF FILING FEE
Transaction Valuation*
Amount of Filing Fee
[$3,185,000.00] [$258.00]
* The transaction valuation was calculated by taking 3,500, the number of
Limited Partnership Interests offered to purchase by the Issuer, and multiplying
it by the purchase price stated in the Offer to Purchase of $910.00 per
Interest.
[ ] Check the box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
Amount Previously Paid:___________________________
Form or Registration No.:__________________________
Filing Party:_____________________________________
Date Filed:______________________________________
SCHEDULE 13E-3
This Schedule 13E-3 relates to the tender offer, severally and not jointly, by
Decade Companies Income Properties-A Limited Partnership, a limited partnership
organized in the State of Wisconsin (the "Partnership") and Jeffrey L.
Keierleber (an affiliate of the Partnership and its General Partner)
("Keierleber") to purchase, in aggregate, up to 3,500 Limited Partnership
Interests (the "Interests"), at a price of $910.00 per Interest, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated July 15,
2003 (the "Offer to Purchase") and in the related Letter of Acceptance (which
together constitute the "Offer"). Copies of such documents are filed as
Exhibits (a)(1)(A) and (a)(1)(B), respectively, to this Schedule 13E-3. The
Offerors are concurrently filing with this Schedule 13E-3 a Schedule TO.
The Offer is being presented to the Limited Partners severally and not jointly
by the Partnership and Keierleber.Pursuant to the terms of the Offer, the
Partnership is offering to purchase the first 100 Interests tendered and
Keierleber is offering to purchase up to an additional 3,400 Interests tendered.
All sections of the Offer to Purchase incorporated by reference into this
Schedule 13E-3, are incorporated for the purposes of providing the required
disclosures.
Item 1. Summary Term Sheet
The information set forth in the Offer to Purchase under "Summary Term Sheet"
is incorporated herein by reference.
Item 2. Subject Company Information
The information set forth in the Offer to Purchase under "Summary Term Sheet,"
"The Offer," "The Offer-Introduction-Background," "The Offer-Price Range of
Interests; Distributions; Trading Volume," "The Offer-Certain Information
Concerning the Offerors" and "The Offer-Past Contacts, Transactions or
Negotiations; Transactions and Agreements Concerning the Interests" and in
Appendix B thereto is incorporated herein by reference.
Item 3. Identity and Background of Filing Person
The information set forth in the Offer to Purchase under "The Offer," "The
Offer-Background," "The Offer-Introduction-Management of the Partnership" and
"The Offer-Certain Information Concerning the Offerors" is incorporated herein
by reference.
Item 4. Terms of the Transaction
The information set forth in the Offer to Purchase under "Summary Term Sheet,"
"The Offer," The Offer-Introduction-Background," "The Offer-Introduction-Post
Offer Plans," "The Offer-Introduction-Determination of the Purchase Price,"
"The Offer-Introduction-Interests of Certain Persons in the Offer," "The
Offer-Introduction-Certain Effects of the Offer," "The Offer-Risk Factors,"
"The Offer-Fairness of the Transaction; Reports, Opinions, Appraisals and
Certain Negotiations; No Approvals Required; No Appraisal Rights," "The
Offer-Certain Federal Income Tax Consequences," "The Offer-Number of Interests;
Expiration Date; Extension of the Offer," "The Offer-Procedure for Tendering
Interests," "The Offer-Withdrawal Rights," "The Offer-Payment of the Purchase
Price," "The Offer-Certain Conditions of the Offer" and "The Offer-Extension of
Tender Period; Termination; Amendments" and the Letter of Acceptance is
incorporated herein by reference.
Item 5. Past Contacts, Transactions, Negotiations and Agreements
The information set forth in the Offer to Purchase under "The Offer-Introduction
- -Post Offer Plans," "The Offer-Introduction-Significant Partnership Events," and
"The Offer-Past Contacts, Transactions or Negotiations; Transactions and
Agreements Concerning the Interests" is incorporated herein by reference.
Item 6. Purposes of the Transaction and Plans or Proposals
The information set forth in the Offer to Purchase under "Summary Term Sheet,"
"The Offer-Introduction-Background," "The Offer-Introduction-Purpose of Offer,"
"The Offer-Introduction-Post Offer Plans," "The Offer-Introduction- Interests
of Certain Persons in the Offer," "The Offer Introduction-Certain Effects of
the Offer," "The Offer-Risk Factors" and "The Offer-Past Contacts, Transactions
or Negotiations; Transactions and Agreements Concerning the Interests" is
incorporated herein by reference.
Item 7. Purposes, Alternatives, Reasons and Effects
The information set forth in the Offer to Purchase under "The Offer-Introduction
- -Purpose of Offer," "The Offer-Introduction-Certain Effects of the Offer," "The
Offer-Introduction-Post Offer Plans," "The Offer-Introduction-Interests of
Certain Persons in the Offer," "The Offer-Risk Factors," "The Offer-Certain
Federal Income Tax Consequences," and in Appendix A attached thereto is
incorporated herein by reference.
Item 8. Fairness of the Transaction
The information contained in the Offer to Purchase under "The Offer-Introduction
- -Determination of the Purchase Price," and "The Offer-Fairness of the
Transaction; Reports, Opinions, Appraisals and Certain Negotiations;
No Approvals Required; No Appraisal Rights" is incorporated herein by reference.
Item 9. Reports, Opinions, Appraisals and Negotiations
The information contained in the Offer to Purchase under "The Offer-Fairness of
the Transaction; Reports, Opinions, Appraisals and Certain Negotiations; No
Approvals Required; No Appraisal Rights" is incorporated herein by reference.
Item 10. Source and Amounts of Funds or Other Consideration
The information set forth in the Offer to Purchase under "Summary Term Sheet,"
"The Offer-Source and Amount of Funds" and "The Offer-Persons/Assets, Retained,
Employed, Compensated or Used" is incorporated herein by reference.
Item 11. Interest in Securities of the Subject Company
The information set forth in the Offer to Purchase under "The Offer-Past
Contacts, Transactions or Negotiations; Transactions and Agreements Concerning
the Interests," "The Offer-Ownership of Interests" and in Appendix B thereto is
incorporated herein by reference.
Item 12. The Solicitation or Recommendation
The information set forth in the Offer to Purchase under "The Offer," and "The
Offer-Introduction-Background" is incorporated herein by reference.
Item 13. Financial Statements
The audited financial statements for the Partnership for the fiscal years ended
December 31, 2002 and 2001 are incorporated herein by reference to the
Partnership's current report on Form 10-KSB filed on March 31, 2003. The
unaudited financial statements for the Partnership for the quarterly period
ended March 31, 2003 are incorporated herein by reference to the Partnership's
quarterly report on Form 10-QSB filed on May 14, 2003. These reports are
available for inspection and copying at the public reference facilities
maintained by the Securities and Exchange Commission (the "SEC") at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or 233 Broadway, New York,
New York 10279 or CitiCorp Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies can also be obtained at a prescribed rate from the
Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or free of charge at the web site maintained by the SEC
at www.sec.gov. Additional information set forth in the Offer to Purchase in
Appendix A and under "The Offer-Certain Information Concerning the Offeror" is
incorporated herein by reference.
No information is being disclosed pursuant to this Item 10 about Mr. Keierleber
because such disclosure is immaterial to the Offer. Financial information about
Mr. Keierleber is immaterial because the Offer is for cash consideration and he
has the funds available.
Item 14. Persons/Assets, Retained, Employed, Compensated or Used
The information set forth in the Offer to Purchase under "The
Offer-Persons/Assets, Retained, Employed, Compensated or Used" is incorporated
herein by reference.
Item 15. Additional Information
The information set forth in the Offer to Purchase and the Letter of Acceptance
is incorporated herein by reference.
Item 16. Exhibits
(a)(1)(A) Offer to Purchase, dated July 15, 2003.
(a)(1)(B) Form of Letter of Acceptance
(a)(1)(C) Form of Cover Letter to Limited Partners
(e)(1) Limited Partnership Agreement (previously filed with Form 8-A on
October 1, 1996).
(e)(2) Adoption of Section 8.6 Fair Pricing Provision (previously filed with
Schedule 14A proxy statement dated December 13, 1996).
(e)(3) Amendment to the Partnership Agreement to Adopt Section 9.1(f) Right of
First Refusal (previously filed with Schedule 14A proxy statement dated
April 26, 2002).
(e)(4) Amendment to the Limited Partnership Agreement (previously filed with
Schedule 14A proxy statement dated April 1, 2003).
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement, is true complete and correct.
DECADE COMPANIES,
GENERAL PARTNER,
DECADE COMPANIES INCOME PROPERTIES
/s/ Jeffery L. Keierleber
Jeffery L. Keierleber,
General Partner,
Decade Companies
/s/ Jeffery L. Keierleber
Jeffery L. Keierleber
Date: July 15, 2003
DECADE COMPANIES INCOME PROPERTIES A LIMITED PARTNERSHIP
Offer for Cash
Up to 3,500 Limited Partnership Interests
At $910.00 net per Interest
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT MIDNIGHT, CENTRAL TIME,
ON AUGUST 13, 2003, UNLESS THE OFFER IS EXTENDED.
Decade Companies Income Properties A Limited Partnership, a
Wisconsin limited partnership (the Partnership), and Jeffrey L.
Keierleber, an affiliate of the Partnership (collectively, the
Offerors), are offering to purchase up to 3,500 Limited Partnership
Interests (Interests) of the Partnership at $910.00 per Interest
(the Purchase Price), net to the seller in cash, on the terms and
subject to the conditions set forth herein and in the related
Letter of Acceptance (which together constitute the Offer). See The
Offer Procedure for Tendering Interests. This Offer incorporates
by reference the Partnership's audited financial statements
contained its Form 10-KSB for the year ended December 31, 2002 and
its Form 10-QSB for the quarter ended March 31, 2003. The
Partnership may file its Form 10-QSB for the quarter ended June 30,
2003 after the Expiration Date unless the Offer is extended.
The Offer is not conditioned on any minimum number of Interests
being tendered. The Offer is, however, subject to certain other
conditions. See The Offer Certain Conditions of the Offer.
This transaction has not been approved or disapproved by the
Securities and Exchange Commission or any State Securities
Regulator nor has the Commission or any State Securities Regulator
passed upon the fairness or merits of such transaction nor upon the
accuracy or adequacy of the information contained in this document.
Any representation to the contrary is unlawful.
Neither the Partnership nor its General Partner makes any
recommendation to any Limited Partner as to whether to tender any
Interests. Each Limited Partner must make his or her own decision
as to whether to tender Interests and, if so, how many Interests to
tender. No executive officer of the General Partner or any of its
affiliates intends to tender Interests pursuant to the Offer.
In deciding whether to tender, please consider:
Jeffrey L. Keierleber controls the General Partner of the
Partnership, and Mr. Keierleber already owns a majority of the
outstanding Interests and thus effectively is able to control the
vote on matters for which Limited Partners in the Partnership have
voting rights.
The interests of the Offerors in purchasing Interests at the offer
price may conflict with the interests of Limited Partners in
obtaining a higher price (see The Offer Introduction Determination
of the Purchase Price).
The Offerors' purchase of Interests will reduce the number of
Limited Partners and the number of Interests that may otherwise
trade, thereby possibly adversely affecting the liquidity and
market value of the remaining Interests (see The Offer Introduction
Certain Effects of the Offer).
The number of Limited Partners may be reduced below 300 by reason
of the Offer, which would allow the termination of registration of
the Interests under the Securities Exchange Act of 1934 (the
Exchange Act), which termination would substantially reduce the
information required to be furnished by the Partnership to holders
of the Interests and which would make certain provisions of the
Exchange Act with respect to going private transactions no longer
applicable to the Partnership (see The Offer Introduction Certain
Effects of the Offer).
The Valuations Group, Inc. has informed the General Partner that
the Offer is fair from a financial point of view (see The Offer
Fairness of the Transaction; Reports, Opinions, Appraisals and
Certain Negotiations; No Approvals Required; No Appraisal Rights).
The Partnership has waived its right under the Partnership
Agreement to purchase any Interests purchased by Mr. Keierleber in
this tender offer.
IMPORTANT
Any Limited Partner desiring to tender all or any portion of his or
her Interests should complete and sign the Letter of Acceptance or
a photocopy thereof in accordance with the instructions in the
Letter of Acceptance and mail or deliver it, and any other required
documents, to the Offerors.
No person has been authorized to make any recommendation on behalf
of the Partnership as to whether Limited Partners should tender
Interests pursuant to the Offer. No person has been authorized to
give any information or to make any representations in connection
with the Offer other than those contained herein or in the Letter
of Acceptance. If given or made, such recommendation and such
information and representations must not be relied upon as having
been authorized by the Offerors.
July 15, 2003
The Offer and withdrawal rights will expire at Midnight, Central
Time, on August 13, 2003, unless the Offer is extended.
A summary of the principal terms of the Offer entitled ASummary
Term Sheet appears on the next few pages. However, you should read
this entire document carefully before deciding whether to tender
your Interests.
If you tender all or any portion of your Interests, you will be
subject to certain risks, including:
The Purchase Price per Interest, while higher than any previous
transaction, may be less than the fair market value and the
ultimate liquidation value of the Interests.
As a result of your tender you may have a taxable gain and may have
to pay state and federal taxes.
If you tender all your Interests, you will no longer have rights to
any future distributions, including any distribution of proceeds
from the sale of properties.
There is a conflict of interest between Limited Partners who tender
Interests in the Offer, Limited Partners who do not tender, and the
General Partner of the Partnership, which creates a risk that the
Purchase Price will be less than the ultimate realized amount of
the Interests.
If you continue to hold all or any portion of your Interests, you
will be subject to certain risks, including:
You may not in the future be able to obtain a higher price for your
Interests than is being offered hereby.
Because there is no developed market for the Interests, you may be
prevented from being able to sell or receive fair value for your
investment.
Because of provisions in the Partnership Agreement designed to
avoid certain tax consequences, there may be restrictions on your
ability to transfer your Interests.
The Partnership has no current plans to liquidate, but reserves
such rights to liquidate.
If tenants occupying some of the Partnership's properties
experience financial difficulties or do not renew their leases, it
could harm the Partnership's financial operations.
The Partnership may acquire additional properties with risks that
are unknown at this time.
There are significant general economic risks associated with
investments in real estate in general.
See RISK FACTORS at page 17 of this Offer.
Questions and requests for assistance or for additional copies of
this Offer, the Letter of Acceptance and any other documents
relating to this Offer may be directed to Mr. Michael G. Sweet,
Decade Companies Income Properties, N19 W24130 Riverwood Dr., Suite
100, Waukesha, Wisconsin 53188.
The date of this Offer is July 15, 2003.
SUMMARY TERM SHEET
THE OFFERORS. The Partnership and Jeffrey L. Keierleber, severally
and not jointly, are making this Offer to all Limited Partners.
The Partnership will purchase the first 100 Interests tendered
using borrowings from an affiliate to pay for such Interests.
Thereafter, Mr. Keierleber will purchase the next 3,400 Interests
tendered with his own funds.
OFFER. The Offerors are offering to purchase up to 3,500 Interests
(or approximately 35% of the currently outstanding Interests) that
are not owned by Mr. Keierleber or certain of his affiliates. See
The Offer.
PURCHASE PRICE. The Offerors will purchase tendered Interests in
cash for $910.00 per Interest. See The Offer Introduction
Determination of the Purchase.
FACTORS IN DETERMINING THE PURCHASE PRICE. In determining the
Purchase Price per Interest, the Offerors considered, among other
things, the following:
The per Interest price paid to Limited Partners in previous
repurchases over the last three years (between $550-$895).
The per Interest price paid to Limited Partners in secondary market
transactions, in which the Offerors did not participate, and of
which the Offerors are aware, over the last three years at prices
ranging from $550 to $551 per Interest.
The absence of a regular trading market for the Interests.
Our estimates of the potential selling price of the Partnership
properties, adjusted for estimated selling, liquidation and other
expenses and discounts.
The third party offers received on the properties.
An unaffiliated March 2002 offer of $550 per Interest for a limited
number of Interests.
The independent appraisals of the Apartments in 2002.
The purchase price paid by the Partnership for the Office Buildings
in 2002.
The prepayment penalties that would be incurred if the Properties
were sold and the mortgages were paid off.
See The Offer Introduction Determination of the Purchase Price for
a more detailed discussion of these factors.
CONDITIONS TO THE OFFER. The Offerors are offering to purchase
outstanding Interests from all Limited Partners. The Offer is not
conditioned on the tender of any minimum number Interests. The
Offerors will not, however, accept your tender if, as a result of
the tender, you would continue to be a Limited Partner and would
hold fewer than three (3) Interests, or two (2) Interests in the
case of an IRA (which is the minimum requirement under the
Partnership Agreement). There are a number of conditions to the
Offer, including the absence of certain changes in the Partnership
and the absence of certain changes in the financial markets. See
The Offer Certain Conditions of the Offer.
PURPOSE OF THE OFFER. The purpose of the Offer is to provide
Limited Partners an opportunity to sell Interests at a price higher
than in reported transactions in the last three years. Depending
on the number of Interests tendered, the Partnership may also be
able to reduce its annual operating costs if it is able to
terminate its reporting obligations under the Securities Exchange
Act of 1934. See The Offer Introduction Purpose of the Offer.
RIGHT TO EXTEND THE EXPIRATION DATE. The Offer expires on August
13, 2003, Midnight, Central Time, but may be extended by the
Offerors beyond the expiration date by providing you with oral or
written notice of the extension. See The Offer Extension of
Tender Period; Termination; Amendments.
HOW TO TENDER YOUR INTERESTS. To tender your Interests, you must
complete and sign the accompanying Letter of Acceptance and Form W-
9 included in these materials, and send it to Decade Companies
Income Properties, N19 W24130 Riverwood Dr., Suite 100, Waukesha,
Wisconsin 53188, or transmit via facsimile to Decade Companies
Income Properties at 262-522-8999 by Midnight, Central Time on
August 13, 2003. See The Offer-Procedure for Tendering Interests.
WITHDRAWAL RIGHTS. You may withdraw your tendered Interests at any
time prior to the expiration of the Offer, including any
extensions, and within 7 days of your tender. Additionally, if the
Offer has not been paid as of September 13, 2003, thereafter you
may also withdraw your Interests from the Offer. See The Offer
Withdrawal Rights.
HOW TO WITHDRAW. To withdraw your Interests, you need to send a
notice of withdrawal to the Offerors. This notice must be in
writing and received by the Offerors at N19 W24130 Riverwood Dr.,
Suite 100, Waukesha, Wisconsin 53188 or via facsimile at 262-522-
8999 on or before the expiration date. If you file a notice of
withdrawal it must specify the name of the person withdrawing the
tender and the amount of Interests previously tendered that are
being withdrawn. See The Offer Withdrawal Rights.
PAYMENT FOR YOUR INTERESTS. If you tender your Interests and the
Offerors accept your tender, the Offerors will pay the Purchase
Price of any of your Interests which they purchase by sending you
a check. The Offerors intend to promptly deliver all checks to the
post office by first class postage-prepaid after the expiration
date. See AThe OfferCPayment of Purchase Price.
PRORATION TERMS. Upon the terms and subject to the conditions of
the Offer, the Offerors will accept for purchase all Interests
tendered by the expiration date. The Offerors are currently
offering to purchase all of the outstanding Interests, except those
owned by Jeffery L. Keierleber, and therefore, no proration is
necessary. In the event that the Offerors reduce the number of
Interests to be purchased pursuant to this Offer, the Offerors will
prorate purchases as set forth below.
In the event of a proration, the Offerors will first accept all of
the tenders from Limited Partners who own fewer than 100 Interests
and who tender all of their Interests by the expiration date. If
this amount is still exceeds the maximum number of Interests to be
purchased pursuant to the Offer, the Offerors will prorate
purchases based upon the ratio of the number of Interests tendered
by each Limited Partner who tendered all of its Interests and who
owns fewer than 100 Interests by the expiration date to the total
number tendered by all Limited Partners who tender all of their
Interests and who own fewer than 100 Interests on the expiration
date. In prorating purchases, the Offerors intend to purchase an
amount so that a tendering Limited Partner, after proration, will
hold three or more Interests or two or more in the case of an IRA,
and no fractional Interests (as required by the Partnership
Agreement).
After this category of tendering Limited Partners has been
satisfied and if there are any funds to purchase any other
Interests tendered and a proration is necessary, the Offerors will
prorate purchases from Limited Partners who tendered some, but not
all, of their Interests or who own 100 Interests or more based upon
the ratio of the number of Interests tendered by each Limited
Partner to the total remaining number of Interests tendered,
provided that the Offerors may round the prorated amount such that
a Limited Partner after the Offer will hold at least three
Interests, or two in the case of an IRA, and will not hold any
fractional Interests. The Partnership believes that only one
limited partner other than Mr. Keierleber owns 100 or more
Interests.
See The Offer Procedure for Tendering Interests.
CERTAIN EFFECTS OF THE TENDER OFFER. As a result of the Offer by
the Partnership, Mr. Keierleber, affiliates of the General Partner,
and, to a lesser degree, Limited Partners who do not tender their
Interests, will have a greater share of the equity, profit, and
losses of the Partnership. Limited Partners who tender their
Interests will no longer share in future earnings, distributions,
or growth of the Partnership, if any. Further, the Limited
Partners who tender will no longer share in the risks associated
with achieving such earnings or the potential to realize greater
value for their Interests. The General Partner and its affiliates
may also benefit by receiving certain fees and distributions
pursuant to the Partnership Agreement. Mr. Keierleber already owns
a majority of the Interests and is able to control the votes for
matters which Limited Partners have voting rights. The Offer may
result in Mr. Keierleber owning a greater number and percentage of
Interests in the Partnership. Additionally, if there are fewer
than 300 Limited Partners remaining after the Offer, the
Partnership may be eligible to terminate its registration with the
Securities and Exchange Commission. See The Offer Introduction
Interests of Certain Persons in the Offer, The Offer Introduction
Certain Effects of the Offer and The Offer Introduction Post Offer
Plans.
TAX CONSEQUENCES. Your sale of Interests in this Offer will be a
taxable transaction for federal income tax purposes. The
consequences to each Limited Partner may vary and you should
consult your tax advisor on the precise tax consequences to you.
See The Offer Certain Federal Income Tax Consequences.
AVAILABILITY OF FUNDS. Both the Partnership, through a loan from
an affiliate, and Mr. Keierleber currently have funds available to
purchase all of the Interests sought in the Offer. See The Offer
Source and Amount of Funds.
QUESTIONS. Questions and requests for assistance, or for
additional copies of this Offer and the Letter of Acceptance may be
directed to the Partnership at its offices at N19 W24130 Riverwood
Dr., Suite 100, Waukesha, Wisconsin 53188, telephone (262) 522-
8990, facsimile (262) 522-8999, Attention: Mr. Michael G. Sweet.
IMPORTANT
Any Limited Partner wishing to tender all or any portion of their
Interests should complete and sign the enclosed Letter of
Acceptance in accordance with the instructions in the Offer and
Letter of Acceptance and the substitute Form W-9 and any other
required documents and deliver such documents to the Partnership.
Limited Partners tendering all or any portion of their Interests
are subject to certain risks. See RISK FACTORS beginning on page
17.
The Offer is not conditioned on the tender of any minimum number of
Interests; provided, however, the Offerors will not accept your
tender if, as a result of the tender, you would continue to be a
Limited Partner and would hold fewer than three Interests, or two
Interests in the case of an IRA (as required by the Partnership
Agreement). The Offer contains certain conditions described in The
Offer Certain Conditions of the Offer.
Neither of the Offerors are making any recommendation to you
regarding whether to tender or refrain from tendering your
Interests. You must make your own decision regarding whether to
tender your Interests, and, if so, how many of your Interests to
tender.
TABLE OF CONTENTS
PAGE
SUMMARY TERM SHEET iv
THE OFFER 1
1. INTRODUCTION 2
A. Background 2
B. Management of the Partnership 3
C. The Properties 4
D. Annual Rental Information for the Properties 5
E. Lease Expirations. 6
F. Summary Financial Information. 7
G. Significant Partnership Events. 9
H. Offer on Properties 10
I. General Information 10
J. Purpose of Offer 11
K. Post Offer Plans 11
L. Determination of the Purchase Price 13
M. Interests of Certain Persons in the Offer 14
N. Certain Effects of the Offer 15
2. RISK FACTORS. 17
3. CERTAIN FEDERAL INCOME TAX CONSEQUENCES 30
A. Sale by Limited Partners 31
B. Retention of Interests by Limited Partners 40
C. Termination of the Partnership 41
D. DMLP NoteCEffect on Adjusted Basis of Limited Partners in
Partnership Interests; Gain Recognized by Limited Partners 42
4. FAIRNESS OF THE TRANSACTION; REPORTS, OPINIONS, APPRAISALS AND
CERTAIN NEGOTIATIONS; NO APPROVALS REQUIRED; NO APPRAISAL RIGHTS43
5. NUMBER OF INTERESTS; EXPIRATION DATE; EXTENSION OF THE OFFER51
6. PROCEDURE FOR TENDERING INTERESTS 52
A. Proper Tender of Interests 52
B. Determinations of Validity 53
C. Rule 14E-4 53
D. Proration 53
E. Procedures for Tendering Interests 54
F. Signature Guarantees and Method of Delivery 55
7. WITHDRAWAL RIGHTS 56
8. PAYMENT OF PURCHASE PRICE 57
9. CERTAIN CONDITIONS OF THE OFFER 58
10. PRICE RANGE OF INTERESTS; DISTRIBUTIONS; TRADING VOLUME 60
11. CERTAIN INFORMATION CONCERNING THE OFFERORS 61
12. SOURCE AND AMOUNT OF FUNDS 62
A. Source of Funds 62
B. Conditions 62
C. Expenses 63
D. Borrowed Funds 63
13. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS; TRANSACTIONS AND
AGREEMENTS CONCERNING
THE INTERESTS 64
14. OWNERSHIP OF INTERESTS 64
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS 65
16. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED
OR USED 66
A. Solicitations or Recommendations 66
B. Employees and Partnership Assets 66
17. MISCELLANEOUS 67
Appendix A INDEX TO PRO FORMA FINANCIAL INFORMATION 69
Appendix B LIMITED PARTNERSHIP ACTIVITY 82
Appendix C FORM OF DEMAND PROMISSORY NOTE 83
Appendix D FAIRNESS OPINION OF THE VALUATIONS GROUP 85
Appendix E TRANSMITTAL LETTER TO LIMITED PARTNERS 86
Appendix F LETTER OF ACCEPTANCE 88
To the Holders of Interests of
Decade Companies Income Properties A Limited Partnership:
THE OFFER
Decade Companies Income PropertiesCA Limited Partnership, a
Wisconsin limited partnership (the Partnership) and Jeffrey L.
Keierleber, severally and not jointly, (collectively, the Offerors)
are offering to purchase up to 3,500 of the Limited Partnership
Interests (Interests), at $910.00 per Interest (the Purchase
Price), net to the seller in cash, on the terms and subject to the
conditions set forth herein and in the related Letter of Acceptance
(which together constitute the Offer). Jeffrey L. Keierleber, an
individual, is currently a general partner in the General Partner
of the Partnership. Accordingly, Mr. Keierleber is an affiliate of
the Partnership. The address of the principal executive offices of
the Partnership is N19 W24130 Riverwood Dr., Suite 100, Waukesha,
Wisconsin 53188, and its telephone number is (262) 522-8990. The
Partnership will purchase up to the first 100 Interests tendered
and Mr. Keierleber will purchase up to the next 3,400 Interests
tendered. The offer and withdrawal rights expire at midnight,
Central Time, on August 13, 2003 (the Expiration Date), unless the
Offerors extend the period of time during which the offer will
remain open.
The Offer is not conditioned on any minimum number of Interests
being tendered. The Offer is, however, subject to certain other
conditions. See The Offer Certain Conditions of the Offer. For
accounting purposes, the Offer will be accounted for by the
Partnership as a repurchase of Interests and Mr. Keierleber's
purchases will not impact accounting by the Partnership.
Tendering Limited Partners will not be obligated to pay brokerage
commissions, solicitation fees, transfer fees or transfer taxes on
the purchase of Interests by the Offerors. However, any tendering
Limited Partner who fails to complete and sign the substitute Form
W-9 that is included in the Letter of Acceptance may be subject to
a required federal income tax backup withholding of 28% of the
gross payments payable to such Limited Partner pursuant to the
Offer.
The Offerors make no recommendation to any Limited Partner as to
whether to tender any interests. Each Limited Partner must make
his or her own decision as to whether to tender Interests and, if
so, how many Interests to tender. The Offerors have been advised
that no executive officer of the General Partner or any of its
affiliates intends to tender Interests pursuant to the Offer.
As of July 15, 2003, the Partnership had 10,261.51 Interests issued
and outstanding. As of July 15, 2003, there were approximately 422
Limited Partners. The Interests are not currently registered for
trading on any exchange and there is no established trading market
for the Interests. If Mr. Keierleber purchases 3,400 Interests
under this Offer and the Partnership acquires 100 Interests, Mr.
Keierleber will own 99% of the then outstanding Interests.
1. INTRODUCTION
A. Background.
The Partnership is a limited partnership formed in 1985 under the
Wisconsin Uniform Limited Partnership Act.
Jeffrey L. Keierleber, an affiliate of the Partnership, and the
Partnership, severally and not jointly, are making the Offer to
offer Limited Partners who require or desire liquidity the
opportunity to receive cash for their Interests. Each Limited
Partner has the opportunity to make an individual decision on
whether or not to tender Interests pursuant to the Offer. The
Offerors are making the Offer to provide Limited Partners an
opportunity to tender their Interests and immediately receive cash.
The Offerors believe that there are both Limited Partners who
desire to sell their Interests immediately for cash in order to
obtain liquidity, and Limited Partners who desire to retain their
Interests in order to benefit from any future appreciation that may
be realized from continued operation and eventual sale of a
qualified replacement property (or properties).
Neither of the Offerors is making any recommendation to Limited
Partners as to whether to tender Interests.
All questions as to the number of Interests to be accepted and the
validity, form, eligibility (including the time or receipt) and
acceptance for payment of any tender of Interests will be
determined by the Offerors, in their sole discretion, which
determination will be final and binding on all parties. The
Offerors reserve the right to reject any and all tenders they
determine not to be in proper form or the acceptance of which, in
the opinion of their counsel, may be unlawful.
The Partnership currently is engaged in the business of owning and
operating residential apartments and office buildings. In
February, 1990, the Partnership acquired Town Place Apartments
(Town Place), a 240-unit apartment complex located in Clearwater,
Florida. In November, 1993, the Partnership acquired Pelican Sound
Apartments (Pelican Sound), a 379-unit apartment complex located in
St. Petersburg, Florida. The two apartment complexes currently
owned by the Partnership are collectively referred to as the
Apartments throughout this Offer. In July 2002, the Partnership
acquired Spectrum Office Building (Spectrum), a 125,000
(approximately) square foot office building located in Maitland,
Florida and Plymouth Plaza Office Building (Plymouth), a 54,000
square foot (approximately) office building located in Clearwater,
Florida. The two office buildings currently owned by the
Partnership are collectively referred to as the Office Buildings
throughout this Offer. The Apartments and the Office Buildings are
collectively referred to as the Properties throughout this Offer.
The Partnership also owns an investment in a limited liability
company, Decade Mortgage Loan Partners LLC (DMLP), which is an
affiliated entity that was created by the General Partner and its
affiliates to purchase the outstanding mortgage loan that
encumbered the Office Buildings. The Partnership owns 4,285
(48.7%) of the 8,805 DMLP Units outstanding.
B. Management of the Partnership.
Directors and Executive Officers. The Partnership is managed by
Decade Companies a General Partnership (Decade Companies) who acts
as the General Partner of the Partnership. Neither the Partnership
nor Decade Companies, a general partnership and its general
partner, have a Board of Directors. Mr. Keierleber is the sole
individual general partner of Decade Companies and is the president
of the corporate General Partner of Decade Companies.
Mr. Jeffrey Keierleber (age 50), is a licensed real estate broker
and owns and manages real estate. He is the sole director of the
corporate General Partner of the Partnership and for various other
limited partnerships and serves as a co-General Partner in the
public limited partnerships sponsored by affiliates of Decade
Companies, and he is a General Partner of the Partnership in all of
the non-public limited partnerships sponsored by affiliates of
Decade Companies. Mr. Keierleber is a shareholder, officer, and
director of a number of privately held and affiliated corporations,
often with a focus in real estate or related services.
Decade 80, Inc., a corporation wholly owned by Mr. Keierleber
(Decade 80) was admitted as a general partner of the General
Partner of the Partnership in December 1992. Mr. Keierleber is the
sole director and President of Decade 80 and Mr. Michael G. Sweet
is its Secretary. See The Offer Certain Information Concerning the
Offerors and The Offer Ownership of Interests for additional
information regarding the Offerors and their affiliates.
Significant Employees of Affiliates Who Provide Services to the
Partnership. The names, ages and business experience of significant
employees of the General Partner and its affiliates are as follows:
Mr. Steven Cooper (age 58), is a Certified Property Manager and has
served as Vice-President of Decade Properties, Inc. (DPI). DPI is
a provider of property management services to the Partnership since
1986. Mr. Cooper also serves as the lead Property Manager for all
properties managed by DPI and allocates a portion of his time to
the direct on site management of those properties and staff.
Mr. Michael G. Sweet (age 53), is a Certified Public Accountant and
has served as the Controller of Decade Companies and Partnership
Manager of the Decade-sponsored Partnerships since 1982, and as an
officer and/or director of various affiliated entities since 1988.
Family relationships. There is no family relationship between
any of the foregoing individuals.
C. The Properties.
The following paragraphs provide information about the Partnerships
current real estate investments.
1. Pelican Sound Apartments
10200 Gandy Boulevard
St. Petersburg, Florida 33702
Pelican Sound was built in 1988 and consists of 379 one and two
bedroom air conditioned living units with individual washers and
dryers. The units range in size from 505 square feet to 895 square
feet. The complex consists of 13 two and three-story wooden frame
with brick veneer garden apartment buildings plus a 1,961 square
foot clubhouse/leasing office on approximately 21.59 acres. The
complex includes a swimming pool with jacuzzi, two tennis courts,
569 parking spaces, and an exercise room available for all
residents.
The complex is located in the Gateway region of St. Petersburg, on
Gandy Boulevard approximately one mile west of the Gandy Bridge.
The location provides easy access to both the Pinellas and
Hillsborough business districts and the location is considered by
the General Partner to be a positive growth area for both
commercial and residential developments.
2. Town Place Apartments
2545 N.E. Coachman Road
Clearwater, Florida 33575
Town Place was built in 1985 and consists of 240 one and two
bedroom units. The units range in size from 540 square feet to
1,036 square feet. The complex consists of 24 buildings plus an
office on approximately 25.7 acres. The complex includes a
swimming pool with Jacuzzi, two tennis courts, volleyball court, a
6.7 acre lake, clubhouse, 365 parking spaces, and a laundromat for
all residents.
The property is located on the south side of N. E. Coachman Road
approximately one mile northwest from the intersection of U.S.
Highway 19 and Route 60. The surrounding neighborhood primarily
consists of well established, fully developed, residential
properties with supporting commercial facilities lining the major
thoroughfares. The improvements in the neighborhood contain a
mixture of commercial and residential uses. The main traffic
arteries are typically lined with commercial improvements,
including offices, service stations, convenience stores,
restaurants, service shops, auto sales/repair facilities, banks,
and other commercial uses. The balance of the surrounding areas
are primarily developed with a mixture of single family and
multiple family development. Clearwater Beach, Florida is
approximately seven miles from the property.
3. The Spectrum Office Building
900 Winderly Place
Maitland, Florida
Spectrum is located in the Maitland Center office park in Maitland,
Orange County, Florida. Spectrum is a two- story, 125,098 square
foot (with approximately 113,000 rentable square feet) atrium-style
office building, built in 1986. The land area is approximately 9.28
acres. There are approximately 409 grade level parking spaces. The
Maitland Center office park is adjacent to Interstate 4.
4. Plymouth Plaza Office Building
26750 U.S. 19 North
Clearwater, Florida
Plymouth is located in the North Pinellas office submarket in
Clearwater, Pinellas County, Florida. Plymouth Plaza is a five-
story, 53,723 rentable square foot office building. The building
includes a 354-car, five level parking garage and 47 surface
spaces. The property has access from Countryside Boulevard and U.S.
19 service road. The former owner of Plymouth retained
approximately 4.5 acres of vacant land adjacent to Plymouth. The
Partnership agreed to enter into a lease agreement with the owner
of the vacant parcel for parking privileges in the parking garage
owned by the Partnership.
D. Annual Rental Information for the Properties.
The average effective annual rental rate per apartment unit is as
follows:
Number Year Ended December 31,
of Units 2002 2001 2000
Pelican Sound 379 $7,487 $7,482 $7,138
Town Place 240 $6,348 $6,868 $6,755
The average effective annual rental per occupied rentable square
foot (RSF) at the Office Buildings is as follows:
Annualized Rent per Occupied RSF
Occupied Year Ended December 31,
RSF 2002 2001 2000
Spectrum Building 43,694 $18.34 N/A N/A
Plymouth Plaza 42,284 $19.47 N/A N/A
E. Lease Expirations.
A schedule of lease expirations for the Apartments and Office
Buildings for each of the next ten years is set forth below.
Year The number of Tenants whose lease will expire
The total area in square feet covered by such leases (approximate)
Annual rental represented by such leases (approximate)
Percentage of gross annual rental represented by such leases
(approximate)
2003 528 416,000 2,610,000 72%
2004 3 18,000 185,000 22%
2005 6 24,000 145,000 43%
2006 0 0 0 0%
2007 4 10,000 167,000 100%
2008 N/A N/A N/A N/A
2009 N/A N/A N/A N/A
2010 N/A N/A N/A N/A
2011 N/A N/A N/A N/A
2012 N/A N/A N/A N/A
The approximate number of tenants whose leases will expire in 2003
are as follows:
All Properties 528
Pelican Sound 330
Town Place 190
Spectrum 7
Plymouth 1
The approximate total area in square feet covered by such leases
that will expire in 2003 are as follows:
All Properties 416,000
Pelican Sound 225,000
Town Place 158,000
Spectrum 24,000
Plymouth 9,000
The approximate annual rental represented by such leases that will
expire in 2003 is as follows:
All Properties $2,610,000
Pelican Sound $1,381,000
Town Place $ 775,000
Spectrum $ 309,000
Plymouth $ 145,000
The percentage of gross annual rental represented by such leases
that will expire in 2003 is 72% for the Properties. The percentage
of gross annual rental represented by such leases that will expire
in 2003 is 100% for the Apartments. The percentage of gross annual
rental represented by such leases that will expire in 2003 is 31%
for the Office Buildings.
F. Summary Financial Information.
The following table sets forth certain summary financial
information derived from the audited financial statements of the
Partnership. The historical financial information for the years
ended December 31, 2002 and 2001 has been derived from our audited
consolidated financial statements included in our 2002 annual
report on Form 10-KSB. The historical financial information for
the quarters ended March 31, 2003 and 2002 has been derived from
our unaudited consolidated financial statements included in our
quarterly reports on Form 10-QSB for the quarters ended March 31,
2003 and 2002. You should read the following summary historical
financial information together with such audited and unaudited
consolidated financial statements and their related notes. Limited
Partners are urged to make their own assessment of the value of
their Interests. Additional information in The Offer
Miscellaneous explains how Limited Partners may obtain copies of
the annual report on Form 10-KSB.
Summary Statement of Operations Data:
Quarter Ended March 31, Year Ended December 31,
2003 2002 2002 2001
In thousands of dollars, except per Interest data)
Revenue
Operating
revenue $1,466 $1,125 $5,309 $4,828
Equity in earnings of
unconsolidated
affiliate 90 0 121 0
Total
revenue 1,556 1,125 5,430 4,828
Costs and expenses:
Cost of
operations 1,560 1,201 5,998 4,786
General and
administrative 41 73 353 194
Total costs
and expenses 1,601 1,274 6,351 4,980
Net income (Loss) from continuing
operations $ (45) $ (149) $ (921) $(152)
Per Limited Partner Interest:
Net income
(loss) $ (44) $ (148) $ 648 $ 1
Ratio of earnings to combined fixed
charges 0.89 0.60 0.53 0.90
Summary Balance Sheet Data:
March 31, December 31,
2003 2002 2002 2001
(In thousands of dollars, except per Interest data)
Current
Assets $ 189 $ 9,760 $ 259 $ 3,467
Noncurrent
Assets 29,485 15,158 29,716 22,012
Total
Assets 29,674 24,918 29,975 25,479
Current
Liabilities 1,458 2,059 1,501 1,233
Noncurrent
Liabilities 27,716 18,675 27,929 27,955
Total
Liabilities 29,174 20,734 29,430 29,188
Total
Capital
(Deficit) 500 4,184 545 (3,709)
Total
Liabilities
and Capital $29,674 $24,918 $29,975 $25,479
Per Limited Partner Interest Data:
Book value
per Interest $51 $316 $ 55 $ (270)
G. Significant Partnership Events.
In the past two years, the Partnership has engaged in the following
significant transactions in connection with affiliates of the
Partnership:
On April 8, 2002, Mr. Keierleber and the Partnership, severally and
not jointly, initiated a tender offer to purchase up to 7,700
Limited Partnership Interests at $895.00 per Interest. That tender
offer expired on May 10, 2002. Pursuant to that tender offer, Mr.
Keierleber accepted an aggregate of 2,809.097 Interests at a price
of $895.00 per Interest, net to the selling Limited Partners in
cash, for an aggregate of $2,514,141.82. Mr. Keierleber used his
own personal funds to purchase the 2,809.097 Interests in that
tender offer. Additionally, pursuant to that tender offer, the
Partnership accepted an aggregate of 3,000 Interests at a price of
$895.00 per Interest net to the selling Limited Partners in cash,
for an aggregate amount of $2,685,000. As a result of his purchases
in the tender offer, Mr. Keierleber became the owner of a majority
of the limited partnership Interests.
On July 30, 2002, the Partnership purchased Spectrum, in Maitland,
Orange County, Florida, and Plymouth, in Clearwater, Pinellas
County, Florida. On August 27, 2002 subsequent to the purchase of
the Office Buildings, the Partnership invested in Decade Mortgage
Loan Partners, LLC, a Wisconsin limited liability company (ADMLP),
formed to, among other things, purchase the mortgage note
associated with the properties. The Partnership and five entities
affiliated with the Partnership comprise all of the members of
DMLP. Additional information on the Partnership's purchase of the
Office Buildings, and its investment in DMLP and the mortgage note,
can be found in the Partnership's proxy statement dated March 31,
2003 and filed with the SEC.
On August 27, 2002, the Partnership used $4.2 million of cash
reserves from The Meadows II exchange escrow to purchase 4,200
units (the ADMLP Units) (approximately 47.7% of the 8,805 DMLP
Units issued and outstanding) of DMLP. DMLP was formed by
affiliates of the General Partner for the purpose of purchasing the
mortgage note encumbering the Office Buildings (the ANote).
On August 29, 2002, DMLP purchased the Note, and the Partnership
simultaneously reduced the outstanding principal balance of the
Note by $1,277,226 (from $10,079,064 to $8,801,838). In connection
with this transaction, the Partnership also paid a prepayment
penalty of $302,372 computed at 3% of the outstanding principal
balance of the Note, in exchange for certain modifications to be
made to the terms of the Note.
In December 2002, the Partnership purchased an additional 85 Units
of DMLP for $85,000 to increase its ownership of DMLP to
approximately 48.7%.
H. Offer on Properties.
In its ordinary course of operations, the Partnership has received
offers to purchase of its Properties. The Partnership has not
received any oral and written offers during the fiscal years ending
2000, 2001, and 2002, except that the Partnership received and
rejected or countered two offers for Pelican Sound Apartments (or
expressions of interests to such effect) for $18.2 million and
$20.0 million. These were not considered to be firm offers and
contained unknown contingencies which were deemed to be
unacceptable.
The General Partner will continue to consider offers for sale of
the Partnership's remaining properties, but there can be no
assurance that either will be sold during the current year or at
any particular time or price.
The Partnership does not believe it is dependent upon any single
tenant or small groups of tenants for its operating success. The
loss of any one, or a small group of tenants would not have a
material adverse effect on the financial condition of the
Partnership. The Partnership does not foresee any events or market
trends which would have a materially adverse effect upon the
Partnership's revenues, except for increased competition for
residents.
The real estate operation of the Partnership, including the value
of its real estate holdings, may be affected by many factors over
which the Partnership has limited or no control, including changes
in general and local economic conditions, interest rate levels,
availability and terms of financing, changes in tax laws and
fluctuations in operating costs. The principal factors affecting
rental rates and occupancy levels include location, ease of access,
amenities, and the quality of property management services.
I. General Information.
At the close of business on July 15, 2003, the Partnership's
10,261.51 Interests were held by 422 Limited Partners. The General
Partner of the Partnership is Decade CompaniesCA General
Partnership (of which Jeffrey Keierleber and Decade 80, Inc. are
the general partners). The principal offices of Decade Companies
and the Partnership are located at N19 W24130 Riverwood Dr., Suite
100, Waukesha, Wisconsin 53188-1131, telephone (262) 522-8990.
J. Purpose of Offer.
The purpose of the Offer is to provide Limited Partners an
opportunity to sell Interests at a price higher than reported
transactions in the last three years.
In addition, the purpose of the Offer is to reduce the number of
Limited Partners below 300, which will terminate its reporting
obligations under the Securities Exchange Act of 1934 and will
reduce the annual operating costs of the Partnership. The passage
of the Sarbanes-Oxley Act of 2002 has greatly increased reporting
requirements for public companies and with it the financial burden
of preparing and filing the reports. The SEC and the United States
Government Accounting Office estimate that public companies could
incur an aggregate of approximately $350 million or more in
additional expenses as the result of the new rules and that public
companies will now pay an aggregate of nearly $1.5 billion in
connection with the filing of annual and quarterly reports with the
SEC. Depending upon how many Interests are tendered in this Offer,
the number of Limited Partners could be reduced to a number below
300, and the Partnership may be able to avoid the financial burden
of being obligated to file reports under the Exchange Act. The
Partnership intends to retire the 100 Interests that it purchases
in the Offer. Mr. Keierleber intends to retain all of the
Interests that he purchases in the Offer.
K. Post Offer Plans.
Following the consummation of the Offer, except as discussed below,
it is expected that the business and operations of the Partnership
will be continued by the Partnership substantially as they are
currently being conducted. Except as discussed below, Mr.
Keierleber, Decade Companies and Decade 80, nor any affiliate
thereof, has any plans or proposals which relate to or would result
in: (a) the acquisition by any person of additional securities of
the Partnership or the disposition of securities of the
Partnership; (b) an extraordinary transaction, such as a merger,
reorganization or liquidation, involving the Partnership; (c) a
sale or transfer of a material amount of assets of the Partnership;
(d) any change in the present management of the Partnership; (e)
any material change in the present distribution policy or
capitalization or indebtedness of the Partnership; (f) any change
in the Partnership Agreement that could impede the acquisition of
control of the Partnership; or (g) any other material change in the
Partnership's structure or business.
The General Partner has identified and is considering the following
options or some combination thereof:
Continually evaluate the real estate market, and depending on the
conditions of the market, consider the sale one or more of the
Partnership's Properties.
Begin a partial liquidation of the Partnership, whereby the net
proceeds from the sale of any of the Properties would be
distributed pro rata to all remaining Limited Partners, and then
continue to own the remaining Properties.
Begin a complete liquidation of the Partnership by selling the
Properties, distributing the net proceeds to the Partners, and
wind-up and terminate the Partnership.
If the Partnership is unsuccessful in purchasing enough Interests
in this Offer, it may take other actions to reduce the number of
Limited Partners to fewer than 300 in order to qualify to terminate
the registration of the Interests under the Exchange Act. The
termination of registration of the Interests under the Exchange Act
would likely reduce certain of the Partnership's administrative
costs, such as legal, accounting, printing, mailing and investor
communications expenses, and would reduce the information required
to be furnished by the Partnership to the Securities and Exchange
Commission and the Limited Partners. The termination of
registration will also make certain provisions of the Exchange Act,
such as the short-swing profit recovery provisions of Section
16(b), no longer applicable and suspend the requirement to file
reports pursuant to Section 15(d). If you tender your Interests
pursuant to this Offer, you will not receive any further
distributions from the Partnership, even if the related transaction
occurred before the Offer.
The Offerors' purchase of Interests pursuant to the Offer will
reduce the number of Limited Partners and the number of Interests
that might otherwise trade and, depending on the number of
Interests so purchased, could adversely affect the liquidity and
market value of the remaining Interests, although there is
currently no established trading market for the Interests.
Because a possible consequence of the Offer may be that the
Partnership would no longer be required to file reports under the
Exchange Act, the Offer is subject to the requirements of Wisconsin
Administrative Code Section SEC 6.05. Section SEC 6.05 permits
such a transaction to occur if the following conditions are met:
(1) the terms of the transaction, including compensation for the
equity securities to be purchased, are fair to all holders of the
securities; (2) the issuer has delivered to each holder of the
securities and has filed with the Wisconsin Division of Securities
a complete and accurate description of the transaction at least 20
days prior to any purchase or shareholder vote authorizing the
purchase; (3) non-affiliated security holders are treated no less
favorably in connection with the transaction than any affiliates;
and (4) the Wisconsin Department of Financial Institutions,
Division of Securities (the Division) does not find, within 15 days
of the filing of the description of the transaction, that the
transaction constitutes a device, scheme or artifice to defraud or
tends to operate as a fraud or deceit on the holders of the
securities. Pursuant to the requirements of Section SEC 6.05, the
Offerors have filed the Offer to Purchase with the Division on
July 15, 2003.
In connection with this Offer, neither of the Offerors has filed a
Form TO-1 with the Division pursuant to Wisconsin Statutes Chapter
552. The Partnership is expressly exempted from certain filing
requirements under that Chapter. However, on June 9, 2003 the
Offerors requested an exemption for Mr. Keierleber's participation
in the Offer without fulfilling the filing requirements. Mr.
Keierleber has requested an exemption from Chapter 552 filings
because the Partnership already is exempt and Mr. Keierleber is an
affiliated person. In connection with prior tender offers made by
the Offerors, Mr. Keierleber has received exemptions from the
requirements of Chapter 552. This Offer is conditioned upon the
Division of Securities informing the Partnership that it will give
an exemption or will not recommend that an order disallowing the
tender offer be completed. The Wisconsin Division of Securities
will not and has not passed upon the merits of the Offer or made
any finding concerning its fairness.
The Offerors may, in their sole discretion, determine to purchase
any Interests through privately negotiated transactions, open
market purchases or otherwise, on such terms and at such prices as
the Offerors may determine from time to time, the terms of which
purchases or offers could differ from those of the Offer. As of
the date of the Offering, there are no current plans.
L. Determination of the Purchase Price.
The Purchase Price represents the price at which the Offerors are
willing to purchase Interests and was established after considering
the factors described below. No Limited Partner approval is
required or sought. No special committee of the Partnership or the
Limited Partners has approved this Offer and no such special
committee or independent person has been retained to act on behalf
of the Partnership or the Limited Partners in connection with this
Offer.
In making its determination as to fairness, the General Partner has
considered the voluntary nature of the transaction, the competing
interests of different groups of Limited Partners, some who may
tender and some who may retain their Interests, and the current
state of the real estate market in St. Petersburg, Florida,
Maitland Florida, and Clearwater, Florida and nationally. The
General Partner also considered that the Interests are not traded
on any registered securities exchange or on the NASDAQ
over-the-counter market, and, to the knowledge of the General
Partner, there is no market for such Interests, and none is
expected to develop. Thus, in the absence of the Offer, Limited
Partners desiring liquidity often must seek a buyer for their
Interests in negotiated transactions. Please see Appendix B for a
list of recent sale activity of Interests known to the General
Partner.
The General Partner also determined that the liquidation value of
the Partnership's property is uncertain at this time. It is not
possible to determine precisely what price a potential purchaser
would be willing to pay for either of the Partnership's remaining
properties. The Offerors did, additionally, consider third party
offers it received on the properties. The Offerors also considered
the per Interest price paid to Limited Partners in prior
repurchases by the Partnership or in secondary market transactions
over the last three years. See Appendix B for information
concerning Partnership repurchases since January 1, 2001.
In deriving the Purchase Price, the Offerors estimated the value of
the remaining two properties and then assumed commissions, selling,
liquidation and other expenses and discounts as follows:
Cash Reserves and Escrow Deposits $ 500
Assumed Selling Price of Town Place* $10,400,000-11,500,000
Assumed Selling Price of Pelican Sound* $19,000,000-19,250,000
Assumed Selling Price of Spectrum* $ 5,286,000- 5,300,000
Assumed Selling Price of Plymouth Plaza*$ 5,088,000- 5,100,000
Assumed Selling Price of Rights $ 4,366,000
Recovery of Prepayment Penalty through
DMLP Ownership $ 761,000
$44,901,500-46,277,500
Less: Outstanding Debt ($26,970,000)
Less: Estimated Selling Costs, Commissions, etc.*
($3,287,500)-( 3,392,500)
Less: Estimated Prepayment Penalties: ($1,686,000)
Less: Accounts Payable and Accrued Expenses*($1,001,000)
Less: Estimated Liquidation and Wind-Down Costs*($ 274,000)
Estimated Net Cash Proceeds* $11,683,000- 12,954,000
Allocation to General Partner $ 1,519,000- 1,531,000
Allocation to Limited Partners $10,164,000-11,423,000
Estimated Net Cash Proceeds $11,683,000-12,954,000
* Such values are estimated solely for the purposes of this Offer.
As of the date of this Offer there are 10,261.51 Interests
outstanding (or approximately $991-$1,113 per Interest if the
assumptions are correct). The Offer price is at discount from
this amount.
Limited Partners are urged to review the financial information
included in this Offer and available in the Partnership's filings,
before making a decision to tender. For additional information on
the properties, please see the Partnership's audited financial
information statements included in our 2002 annual report on Form
10-KSB incorporated by reference. No financial statements on Mr.
Keierleber have been included because he has personal funds
available to purchase the Interests.
The Offerors did not assign a rank or weight to the factors
described above in determining the $910.00 price.
M. Interests of Certain Persons in the Offer.
The General Partner's interest in the Partnership will not
increase as a result of the Offer. However, the General Partner
could benefit if, upon the eventual sale of the Partnership's
Property, there were sufficient net cash proceeds to permit the
General Partner to share in distributions as set forth in the
Partnership Agreement). The Partnership Agreement permits the
General Partner to receive 12% of the net sale proceeds as well as
other payments set forth in the Partnership Agreement, provided
the Limited Partners have received a certain return. There can be
no assurance, however, that there will be any such amount
available for distribution to the General Partner or that the
remaining Limited Partners will receive either their capital
contributions or any other payment.
Jeffrey L. Keierleber, an affiliate of the General Partner, and
one of the Offerors, beneficially owns 6,694.317 Interests and has
advised the General Partner that neither he nor any of his
affiliates intends to tender their Interests in the Offer. As a
consequence of this Offer, Mr. Keierleber will most likely acquire
a greater percentage ownership of the Partnership and be subject
to the risks and benefits associated with ownership of the
Interests and the business of the Partnership. Michael G. Sweet,
an officer of one of the general partners in the Partnership's
General Partner, owns 8.05 Interests and has informed the Offerors
that he does not intend to tender his Interest in the Offer. Both
persons will retain their investments because they are willing to
hold the Interests and believe in the future value of the
Interests. If the Offer is fully subscribed, Mr. Keierleber will
own approximately 99% of the outstanding Interests upon completion
of the Offer and will continue to control votes. The Partnership
has waived its right under the Partnership Agreement to Purchase
Interests tendered to Mr. Keierleber in this Offer.
An affiliate of the General Partner will continue to manage the
Partnership's Properties and receive property management fees from
the Partnership until the Properties are sold. The General
Partner will continue to manage the Partnership and receive
partnership management fees, as provided in the Partnership
Agreement and disclosed in the note to audited financial
statements.
N. Certain Effects of the Offer.
In addition to the effects of the Offer on tendering and
nontendering Limited Partners and upon the General Partner, the
Offer will affect the Partnership and Limited Partners in several
other respects.
The Partnership will use all of its existing cash reserves and
even borrow funds for the purchase of Interests and will not have
such cash reserves available for future needs and contingencies.
The use of cash reserves will reduce or eliminate the
Partnership's present interest income earned on such cash
reserves.
If there are fewer than 300 Limited Partners remaining after
completion of this Offer, the Partnership intends to apply to
terminate the registration of the Interests under the Securities
Exchange Act of 1934 (the Exchange Act). The termination of
registration of the Interests under the Exchange Act would likely
reduce certain of the Partnership's administrative costs, such as
legal, accounting, printing, mailing and investor communications
expenses, and would reduce the information required to be
furnished by the Partnership to the Securities and Exchange
Commission and the Limited Partners. The termination of
registration will also make certain provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section
16(b), no longer applicable and suspend the requirement to file
reports pursuant to Section 15(d).
Continued holding of the Interests will subject the Limited
Partners to the risks generally incident to the ownership of real
property, including: (a) the uncertainty of sufficient revenue to
meet fixed obligations, if any; (b) adverse changes in national
economic conditions; (c) changes in the popularity of real estate
as an investment; (d) adverse local market conditions due to
changes in general or local economic conditions or neighborhood
values; (e) changes in interest rates and the availability and
terms of mortgage funds in general; (f) the financial condition of
tenants and sellers of property; (g) changes in real estate tax
rates or other operating expenses; (h) energy shortages or price
changes; or (i) governmental actions such as rent or other
economic controls, acts of God, and other factors that are beyond
the control of the General Partner. Although the Partnership
intends to maintain insurance with the types and amounts of
coverage that are customarily maintained by prudent owners of
similar properties, uninsured losses could nevertheless occur. In
addition, certain expenditures associated with real estate equity
investments (principally, real estate taxes and maintenance costs)
are not necessarily decreased by events adversely affecting the
Partnership's income from such investments. Thus, the cash
required to operate a property may exceed the rental income earned
thereon, and the Partnership may have to borrow funds in order to
protect its investment or may be required to dispose of the
property at a loss. The Partnership's ability to meet its
obligations and thereafter to make distributions to the Limited
Partners will depend on these factors and, for these and other
reasons, no assurance of profitable operations can be made. In
addition, there can be no assurance that the value of the
Partnership's real estate holdings will appreciate in the future.
Assuming the Offerors receive tenders for 3,500 Interests pursuant
to the Offer, the effects of the Offer on the General Partner's
and Mr. Keierleber's interest in the net book value and net
earnings of the Partnership are as follows:
The interest of the General Partner in the net book value and net
earnings of the Partnership will not change as a result of the
Offer.
The interest of Mr. Keierleber in the net book value of the
Partnership will decrease from $55 per Interest to $41 per
Interest as a result of the Partnership's purchase and retirement
of 100 Interests. See Appendix A Pro Forma Information to
this Offer to Purchase. As a result of his purchase of 3,400
Interests, Mr. Keierleber's interest in the pro forma net book
value of the outstanding Interests will increase from $271,591
(65% of the pro forma book value of outstanding Interests) to
$409,531 (99% of the pro forma book value of outstanding
Interests).
The interest of Mr. Keierleber in the net earnings of the
Partnership will increase 0.6% (from 64.6% to 65.2%) as a result
of the Partnership's purchase of 100 Interests and will increase
an additional 33.7% (from 64.6% to 98.3%) as a result of his
purchase of 3,400 Interests. His share of the pro forma earnings
from the year ended December 31, 2002 would have increased from
$4,275,541 ($648.10 per Interest) to $4,307,920 ($653.01 per
Interest), as a result of the Partnership's purchase of 100
Interests. See Appendix A - Pro Forma Information to this Offer
to Purchase. As a result of his own purchase of 3,400 Interests,
the interest of Mr. Keierleber in the pro forma earnings for the
year ended December 31, 2002 would have increased from $4,307,920
(59% of the pro forma net income per outstanding Interests) to
$6,528,138 (89% of the pro forma net income per outstanding
Interests).
2. RISK FACTORS.
An investment in the Partnership's Interests involves significant
risk. In addition to the other information contained or
incorporated by reference in this Offer, you should carefully
consider the following risk factors in deciding whether to
continue to tender all or any portion of your Interests, or to
continue to hold all or any portion of your Interests.
If you tender all or any portion of your Interests you are subject
to risks, including the following:
The Purchase Price may be less than the fair market value and the
ultimate liquidation value of the Interests. The Interests are
not traded on a recognized stock exchange or trading market.
There is no active, liquid market for the Interests and it is
unlikely that this type of market will develop in the near future.
We are aware of the following transactions in or offers for
Interests:
The per Interest price paid to Limited Partners in previous
repurchases over the last three years (between $550-$895). See
The Offer-Introduction-Determination of the Offer Price.
The per Interest price paid to Limited Partners in secondary
market transactions, in which the Offerors did not participate,
and of which the Offerors are aware of over the last three years
at prices ranging from $500 to $551 per Interest. See The Offer-
Introduction-Determination of the Purchase Price.
The absence of a trading market for the Interests. See The Offer-
Introduction-Determination of the Purchase Price.
An unaffiliated March 2002 offer of $550 per Interest for a
limited number of Interests (which purchased no Interests).
See Appendix B for details on transactions.
As of March 31, 2003, the book value of one Interest was
approximately $50.85.
Unless held by a tax exempt taxpayer, you will probably have tax
consequences from the sale of your Interests. If you sell
Interests in this Offer you generally will recognize a gain or
loss on the sale of your Interests for federal and most state
income tax purposes. The amount of gain or loss realized will be,
in general, the excess of the amount you realize from selling your
Interests minus your adjusted tax basis in the Interests you sell.
The amount that you realize from the sale of your Interests is
generally the sum of the Purchase Price plus your share of
Partnership liabilities. When you sell Interests which you have
held for more than 12 months, the sale will typically result in
long-term capital gain or loss. Due to the complexity of tax
issues, you are advised to consult your tax advisors with respect
to your individual tax situation before tendering your Interests.
See The Offer Certain Federal Income Tax Consequences.
If You Do Not Tender All or Any Portion of Your Interests, You Are
Subject to Risks Including the Following:
Industry Risk
The Partnership faces certain risks by virtue of the real estate
industry in which is operates.
A. General Risks of Real Estate Ownership
Continued investment in the Interests will be subject to the risks
generally incident to the ownership or real property. Real
property investments are subject to varying degrees of risk and
are relatively illiquid. Several factors may adversely affect the
economic performance and value of the Partnership's Properties.
These factors include changes in the national, regional and local
economic climate, local conditions such as an oversupply of
multifamily properties or office buildings or a reduction in
demand for the Partnership's Apartments or Office Buildings, the
attractiveness of our Apartments to residents, the attractiveness
of our Office Buildings to tenants, competition from other
available multifamily property owners or office building owners,
and changes in market rental rates. The Partnership's performance
also depends on the Partnership's ability to collect rent from
residents of the Apartments and from tenants of the Office
Buildings, and to pay for adequate maintenance, insurance and
other operating costs, including real estate taxes, which could
increase over time. Also, the expenses of owning and operating a
property are not necessarily reduced when circumstances such as
market factors and competition cause a reduction in income from
the property.
For a detailed discussion of the risks associated with investments
in real estate, refer to the Risk Factors set forth in the
Partnership's Prospectus dated January 31, 1986 and June 3, 1987.
B. The Partnership May be Unable to Renew Leases or Relet
Apartment Units or Relet Office Space as Leases Expire
When the Partnership's residents of the Apartments decide not to
renew their leases upon expiration, the Partnership may not be
able to relet their apartment units. When the Partnership's
tenants of the Office Buildings decide not to renew their leases
upon expiration, the Partnership may not be able to relet their
office space. Even if the apartment residents or the office
tenants do renew or the Partnership can relet the apartment units
or the office space, the terms of renewal or reletting may be less
favorable than current lease terms. Virtually all of the
Partnership's leases for Apartments are generally for terms of not
more than one year. If the Partnership is unable to promptly
renew the leases or relet the Apartments or the Office Buildings,
or if the rental rates upon renewal or reletting are significantly
lower than expected rates, then the Partnership's results of
operations and financial condition will be adversely affected.
Consequently, the Partnership's cash flow and ability to service
debt would be reduced. As a result of general economic conditions
and competitive factors discussed above, the Partnership has
experienced a trend of level rents and increased concessions when
entering into new leases during 2002. The Partnership's lack of
cash holdings intensifies this risk.
C. New Acquisitions May Fail to Perform as Expected and
Competition for Acquisitions ay Result in Increased Prices for
Properties
The Partnership intends to continue to actively exchange
multifamily properties and office buildings until the termination
of the Partnership, which is scheduled for December 31, 2005,
unless extended. After completion of the Offer, the General
Partner may and likely will propose an amendment to extend the
term of the Partnership. Newly acquired properties may fail to
perform as expected. The Partnership may underestimate the costs
necessary to bring an acquired property up to standards
established for its intended market position. Additionally, the
Partnership expects that other major real estate investors with
significant capital will compete with it for attractive investment
opportunities. This competition may increase prices for
multifamily properties and office buildings. The Partnership may
not be in a position or have the opportunity in the future to make
suitable property acquisitions on favorable terms.
D. Because Real Estate Investments Are Illiquid, the Partnership
May Not Be Able To Sell Properties When Appropriate
Real estate investments generally cannot be sold quickly. The
Partnership may not be able to change its portfolio promptly in
response to economic or other conditions. This inability to
respond promptly to changes in the performance of the
Partnership's investments could adversely affect the Partnership's
financial condition and ability to resume cash distributions to
the Limited Partners in the future.
E. Changes in Property Tax Rate Could Affect the Partnership's
Business
Under existing leases, the Partnership is generally not able to
pass through to its apartment residents any real estate taxes,
income taxes or other taxes. Consequently, any such tax increases
may adversely affect the Partnership's financial condition and
limit the Partnership's ability to make distributions to its
Limited Partners in the future.
F. Environmental Problems are Possible and Can be Costly
Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous
owner or operator of real estate to investigate and clean up
hazardous or toxic substances or petroleum product releases at
such property. The owner or operator may have to pay a
governmental entity or third parties for property damage and for
investigation and clean-up costs incurred by such parties in
connection with the contamination. These laws typically impose
clean-up responsibility and liability without regard to whether
the owner or operator knew of or caused the presence of the
contaminants. Even if more than one person may have been
responsible for the contamination, each person covered by the
environmental laws may be held responsible for all of the clean-up
costs incurred. In addition, third parties may sue the owner or
operator of a site for damages and costs resulting from
environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and
removal of asbestos. These laws require that owners or operators
of buildings containing asbestos properly manage and maintain the
asbestos, that they notify and train those who may come into
contact with asbestos, and that they undertake special
precautions, including removal or other abatement, if asbestos
would be disturbed during renovation or demolition of a building.
These laws may impose fines and penalties on building owners or
operators who fail to comply with these requirements and may allow
third parties to seek recovery from owners or operators for
personal injury associated with exposure to asbestos fibers.
Substantially all of our Properties have been the subject of
environmental assessments completed by qualified independent
environmental consultant companies. These environmental
assessments have not revealed, nor are we aware of, any
environmental liability that the General Partner believes would
have a material adverse effect on our business, results of
operation, financial condition or liquidity.
The General Partner believes that over the past two years, there
have been an increasing number of lawsuits against owners and
managers of multifamily properties other than the Partnership
alleging personal injury and property damage caused by the
presence of mold in residential real estate. Some of these
lawsuits have resulted in substantial monetary judgments or
settlements. Insurance carriers have reacted to these liability
awards by excluding mold related claims from standard policies and
pricing mold endorsements at prohibitively high rates. The
Partnership has adopted programs designed to seek to minimize the
existence of mold in any of its Properties as well as guidelines
for promptly addressing and resolving reports of mold to minimize
any impact mold might have on residents, tenants, or the Property.
The Partnership cannot be assured that existing environmental
assessments of our Properties reveal all environmental
liabilities, that any prior owner of any of the Partnership's
Properties did not create a material environmental condition not
known to the Partnership, or that a material environmental
condition does not otherwise exist as to any one or more of the
Partnership's Properties.
G. Insurance Policy Deductibles and Exclusions
In order to partially mitigate the substantial increase in
insurance costs in recent years, the General Partner has
determined to gradually increase deductible amounts. As of
June 30, 2003, the Partnership property insurance policy provides
for a per occurrence deductible of $5,000, and for Florida
Properties the windstorm insurance policy provides for a per
occurrence deductible of 3% of Property value per building. While
higher deductible amounts expose the Partnership to greater
potential uninsured losses, the General Partner believes that the
savings in insurance premium expense justifies this increased
exposure. The General Partner anticipates that deductibles will
likely further increase for 2003 policy renewals.
As a result of the terrorist attacks of September 11, 2001,
insurance carriers have created exclusions for losses from
terrorism from our all risk insurance policies. While separate
terrorism insurance coverage is available in certain instances,
premiums for such coverage are generally very expensive, with very
high deductibles. Moreover, the terrorism insurance coverage that
is available typically excludes coverage for losses from acts of
foreign governments as well as nuclear, biological and chemical
attacks. The Partnership has determined that it is not
economically prudent to obtain terrorism insurance to the extent
otherwise available, especially given the significant risks that
are not covered by such insurance. In the event of a terrorist
attack impacting one or more of the Properties, the Partnership
could lose the revenues from the Property, its capital investment
in the Property and possibly face liability claims from residents,
tenants, or others suffering injuries or losses. The Partnership
believes, however, that the number and geographic diversity of its
real estate portfolio help to mitigate its exposure to the risks
associated with potential terrorist attacks.
Partnership Risk
Certain risks are unique to the Partnership.
A. Unspecified Real Property Investments
The Partnership may in the future exchange one or more of its
Properties for another unspecified real property investment. It
is uncertain which property, if any, will be purchased by the
Partnership. The General Partner has substantial discretion in
investing the proceeds from a sale and exchange transaction.
Limited Partners will not have information prior to the Expiration
Date as to the location or other characteristics of any future
replacement property to be acquired or other relevant data,
because there is no such transaction anticipated in the near term.
While the Partnership may obtain an independent appraisal for any
replacement property purchased, such appraisals are estimates of
value only and cannot be relied upon as precise measures of true
worth or realizable value. No assurance can be given that the
Partnership will be successful in obtaining a suitable replacement
property on financially attractive terms or that, if a replacement
property is purchased, the objectives of the Partnership will be
achieved.
Under the terms of a like-kind exchange in accordance with Section
1031 of the Internal Revenue Code, the proceeds in any exchange
escrow resulting from the sale of Partnership Property may remain
uninvested in real estate (up to 180 days from the date of the
sale.) The inability of the Partnership to close on a replacement
property may result in delays in the investment of any exchange
escrow funds in a real estate investment, and therefore, in delays
of the receipt of a return from real property investments and in a
delay in the receipt of any cash flow or capital appreciation from
the Partnership's real property investments and the unavailability
of tax deductions from real property investments.
B. Debt Financing and Other Factors Relating to Financing Could
Adversely Affect the Partnership's Performance
(i) General
To the extent the Partnership incurs mortgage or other
indebtedness, the risks to Limited Partners will be increased.
The amount of indebtedness could require the Partnership to
dedicate a substantial portion of cash flow to the repayment of
indebtedness, thereby reducing the amount of cash flow available
to fund operating expenses and make cash distributions. The
amount of indebtedness could limit the ability of the Partnership
to obtain additional financing, if necessary, for operating
expenses. The amount of indebtedness could place the Partnership
at a competitive disadvantage compared to competitors with less
debt or greater financial resources. The amount of indebtedness
could limit the Partnership's flexibility in planning for, or
reacting to, downturns in the business, in the real estate
industry or in the economy in general. The amount of indebtedness
could limit the Partnership's ability to pursue strategic
acquisitions and other business opportunities that may be in the
best interest of the Partnership.
The Partnership's total mortgage debt summary, as of March 31,
2003, included:
Debt Summary as of March 31, 2003
$ in Thousands Weighted Average Rate
Secured $26,970 5.17%
Fixed Rate $ 8,749 8.46%
Floating Rate $18,221 3.59%
Total $26,970 5.17%
The Partnership's use of debt financing creates certain risks,
including the following.
(ii) Scheduled Debt Payments Could Adversely Affect the
Partnership's Financial Condition
In the future, the Partnership's cash flow could be insufficient
to meet required payments of principal and interest or to resume
payment of cash distributions on the Partnership's Interests at
expected levels.
The Partnership may not be able to refinance existing debt (which
in virtually all cases requires substantial principal payments at
maturity) and, if the Partnership can, the terms of such
refinancing might not be as favorable as the terms of existing
indebtedness. If principal payments due at maturity cannot be
refinanced, extended or paid with proceeds of other capital
transactions, such as new equity capital, the Partnership's cash
flow will not be sufficient in all years to repay all maturing
debt. As a result, the Partnership may be forced to postpone
capital expenditures necessary for the maintenance of its
Properties and may have to dispose of one or more Properties on
terms that would otherwise be unacceptable to the Partnership.
The Partnership's debt maturity schedule as of December 31, 2002
is as follows:
Debt Maturity Schedules as of March 31, 2003
Year $ in Thousands % in Total
2003 $ 464 1.7%
2004 712 2.6%
2005 745 2.8%
2006 779 2.9%
2007 24,270 90.0%
Total $26,970 100.0%
(iii) Financial Covenants Could Adversely Affect the
Partnership's Financial Condition
If a Property the Partnership owns is mortgaged to secure payment
of indebtedness and the Partnership is unable to meet the mortgage
payments, the holder of the mortgage could foreclose on the
Property, resulting in loss of income and asset value. Foreclosure
on mortgaged Properties or an inability to refinance existing
indebtedness would likely have a negative impact on the
Partnership's financial condition and results of operations. A
foreclosure could also result in the Partnership's recognition of
taxable income without the Partnership actually receiving cash
proceeds from the disposition of the Property with which to
distribute to the Partners to pay the tax.
The mortgages on the Partnership's Properties may contain
customary negative covenants that, among other things, limit the
Partnership's ability, without the prior consent to the lender, to
further mortgage the Property and to reduce or change insurance
coverage. The mortgages under which a substantial portion of the
Partnership's debt was issued also contain certain financial and
operating covenants including, among other things, limitations on
the Partnership's ability to incur secured indebtedness or
transfer to another party. Our credit facility and indentures are
not cross-defaulted and also do not contain cross default
provisions with other material indebtedness.
(iv) The Partnership's Degree of Leverage Could Limit Its Ability
to Obtain Additional Financing
The Partnership's Debt-to-Total Capitalized Cost Ratio was 83.2%
as of March 31, 2003. The Partnership has a policy of incurring
indebtedness for financing Properties if (1) the aggregate amount
of mortgage indebtedness (other than short-term financing) which
may be incurred in connection with the acquisition of Properties
shall not exceed 50% of their fair market value (determined by
appraisals prepared by independent appraisers) on a combined
basis, and (2) the aggregate amount of such mortgage indebtedness
incurred in connection with financing or refinancing Properties
subsequent to their acquisition shall not exceed 75% of their
aggregate independently appraised value; the Partnership's degree
of leverage could have important consequences to Limited Partners.
For example, the degree of leverage could affect the Partnership's
ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, or other general
partnership purposes, making the Partnership more vulnerable to a
downturn in business or the economy generally.
(v) Rising Interest Rates could Adversely Affect Cash Flow
Two of the Partnership's mortgage loans bear interest at variable
rates based upon LIBOR at various interest periods. The
Partnership may also borrow additional money with variable
interest rates in the future. Increases in interest rates would
increase the Partnership's interest expenses under these debt
instruments and would increase the costs of refinancing existing
indebtedness and of issuing new debt. Accordingly, higher
interest rates could adversely affect cash flow and the
Partnership's ability to service its debt and to resume cash
distributions to Limited Partners in the future.
C. Conflicts of Interest
The Partnership is subject to various conflicts of interest
arising out of its relationships with the General Partner and its
affiliates as well as the fact that the General Partner and its
affiliates are engaged in a wide range of real estate and other
activities to the Partnership and others.
D. Control and Influence by Significant Limited Partners Could be
Exercised in a Manner Adverse to Other Limited Partners
As of July 15, 2003, Jeffrey Keierleber, an affiliate of the
General Partner, beneficially owned 6,694.317 of the Partnership's
outstanding Interests. If he purchases 3,400 Interests and the
Partnership purchases 100 Interests, he will own 99% of the
remaining Interests.
The Offer is not conditioned on the tender of a minimum number of
Interests. Mr. Keierleber owns a majority of the Partnership's
outstanding Interests. He has the power to approve certain
actions, without the consent of any other Limited Partners. Under
Wisconsin's Limited Partnership law, such actions include:
removal of the General Partner;
certain amendments to the Partnership Agreement;
termination of the Partnership; and
sales of all or substantially all of the Partnership's assets.
As a result of his security ownership in the General Partner, Mr.
Keierleber has substantial influence and control over the
Partnership. As a result of his security ownership in the
Interests of the Partnership, Mr. Keierleber has substantial
influence over the Partnership to the extent that Limited Partners
have the right to vote on matters. Accordingly, Mr. Keierleber is
in a position to influence the Partnership's affairs. This
influence could conceivably be exercised in a manner that is
inconsistent with the interests of other Limited Partners.
E. Limited Partners' Ability to Effect Changes in Control of the
Partnership is Limited Provisions of the Partnership Agreement
Could Inhibit Changes in Control
Certain provisions of the Partnership Agreement may delay or
prevent a change in control of the Partnership or other
transactions that could provide the Limited Partners with a
premium over the then-prevailing secondary market price of their
Interests or which might otherwise be in the best interest of the
Partnership's Limited Partners. These include the Fair Price
Provision, and the Right of First Refusal Provision of the
Partnership Agreement, and certain voting provisions that could
delay or prevent a change of control or other transactions that
might otherwise be in the interest of the Partnership's Limited
Partners.
F. Dependence on Key Personnel
The Partnership is dependent on the efforts of its General
Partner, and Mr. Keierleber, and the individuals employed by the
General Partner and its affiliates. While the Partnership
believes that it could find replacements for these key personnel,
the loss of their services could have a temporary adverse effect
on the operations of the Partnership. None of these individuals
has entered into employment agreements with the Partnership, the
General Partner, or any affiliate.
Investment Risk
Certain risks are specifically and directly tied to the Limited
Partnership Interests.
A. Lack of a market for the Partnership's Interests
To the knowledge of the General Partner, there is no developed
market for Interests and the Interests are not traded on any
registered securities exchange or the NASDAQ over-the-counter
market. Consequently, without a developed market for the
Interests, Limited Partners may be prevented from being able to
liquidate their investment or receive fair value. Although the
Interests are transferable, subject to certain limitations set
forth in the Partnership Agreement, we do not anticipate that any
active, liquid, public market will develop.
There are restrictions on the ability of a Limited Partner to
transfer Interests. There are limits on the transferability of
Interests to avoid certain tax consequences. Also under the
Partnership Agreement, Limited Partners may transfer or assign
Interests to persons who may then become substituted limited
partners. The General Partner can decide to allow or disallow
these transfers in its sole discretion.
There can be no assurance that a higher price than is being
offered hereby for the Interests will be obtained in the future.
B. Lack of Cash Distributions
Future cash distributions will depend upon the case reserves and
operating income of the Partnership. Cash distributions were
suspended in 2002, and may possibly be permanently eliminated.
Depending upon the results of the tender, the leveraging of the
Partnership, and the future operation of the Properties, the
Partnership intends to resume making annual cash distributions in
the future after the operation of the Office Buildings is
stabilized.
C. Uncertainty of the Term of the Investment
The Partnership has not determined whether to liquidate, but
reserves its rights to do so. Under the Partnership Agreement,
the Partnership is to terminate on December 31, 2005, unless
terminated sooner as allowed under the Partnership Agreement or
extended by majority vote of the Limited Partners. However, the
General Partner will likely propose an amendment to the
Partnership Agreement to extend the termination date.
D. Tax Considerations
For a more thorough discussion of income tax consequences upon the
sale of an Interest, see The Offer - Certain Federal Income Tax
Considerations. The discussion therein summarizes the federal
income tax considerations material to a Limited Partner. It is
not exhaustive of all possible tax considerations. For example,
it does not give a detailed discussion of any state, local or
foreign tax considerations. The discussion also does not address
all tax matters that may be relevant to Limited Partners in light
of their particular circumstances. Moreover, it does not address
all tax matters that may be relevant to Limited Partners who are
subject to special treatment under the tax laws, such as insurance
companies, tax-exempt entities, financial institutions or broker-
dealers, foreign corporations and persons who are not citizens or
residents of the United States.
The specific tax attributes of a particular Limited Partner could
have a material impact on the tax considerations associated with
the purchase, ownership and disposition of Interests. Therefore,
it is essential that each prospective Limited Partner consult with
his or her own tax advisors with regard to the application of the
federal income tax laws to the Limited Partner's personal tax
situation, as well as any tax consequences arising under the laws
of any state, local or foreign taxing jurisdiction.
The information is based on the current Internal Revenue Code,
current, temporary and proposed Treasury regulations, the
legislative history of the Internal Revenue Code, current
administrative interpretations and practices of the Internal
Revenue Service, including its practices and policies as set forth
in private letter rulings, which are not binding on the Internal
Revenue Service, and existing court decisions. Future
legislation, regulations, administrative interpretations and court
decisions could change current law or adversely affect existing
interpretations of current law. Any change could apply
retroactively. Thus, it is possible that the Internal Revenue
Service could challenge the statements in this discussion, which
do not bind the Internal Revenue Service or the courts, and that a
court could agree with the Internal Revenue Service.
Business Risks Mortgage Asset Portfolio Investments
By virtue of its investment in DMLP, the Partnership is exposed to
certain risks related to the real estate mortgage lending
business. Those risks are as follows:
Adverse Effects of Loan Prepayments. The level of prepayments of
the Note or other future collateral mortgage loans may materially
adversely impact the financial condition and results of operations
of DMLP. The General Partner expects that the Partnership will,
prior to the Maturity Date, prepay all or part of the Note either:
(1) upon the sale of either Spectrum or Plymouth, or (2) upon
refinancing the Note to obtain more favorable mortgage loan terms.
Although prepayment of the Note (or other future collateral
mortgage loans) by the Partnership may result in lower interest
costs and thereby benefit the Partnership, such prepayment of the
Note (or other future collateral mortgage loans) by the
Partnership may adversely affect the amount of portfolio income
that the Partnership can earn through its investment in DMLP which
owns the Note (or other future collateral mortgage loans). The
General Partner believes that collateral mortgage loan prepayment
rates generally increase when market interest rates fall below the
current interest rates on mortgage loans. The General Partner
believes that prepayment experience also may be affected by the
expiration of prepayment penalty clauses, the ability of the
borrower to obtain a more favorable mortgage loan, geographic
location of the property securing the mortgage loans, the
assumability of a mortgage loan, conditions in the housing and
financial markets and general economic conditions.
Risks of Extending Credit. During the time that DMLP holds the
Note (or other future collateral mortgage loans), it is subject to
credit risks, including risks of borrower defaults, bankruptcies
and special hazard losses that are not covered by standard hazard
insurance (such as those occurring from earthquakes or floods).
In the event of a default on any mortgage loan (including the
Note) held by DMLP, DMLP will bear the risk of loss of principal
to the extent of any deficiency between the value of the secured
property and the amount owing on the mortgage loans (including the
Note), less any payments from an insurer or guarantor. DMLP has
not established an allowance for loan losses, and there can be no
assurance that any allowance for loan losses which may be
established will be sufficient to offset losses on mortgage loans
in the future.
Risks of Economic Downturn. A downturn in the national economy
and the resultant adverse impact on employment rates could
adversely affect the mortgage loan defaults. Additional credit
could become scarce in such an environment and therefore risk of
loss through loan default and decreased property value could
increase. DMLP does not have an allowance for loan losses, which
may be inadequate should economic conditions worsen significantly
causing a default of the Note (or other future collateral mortgage
loans) and property value decreases. The management of DMLP
believes that no allowance for loan losses is adequate or
appropriate at this time.
Adverse Effect of Possible Delays. Even assuming that properties
secured by the Note (or other future collateral mortgage loans)
held by DMLP provide adequate security for such Note (or other
future collateral mortgage loans), substantial delays could be
encountered in connection with the foreclosure of the defaulted
Note (or other future collateral mortgage loans), with
corresponding delays in the receipt of related proceeds by DMLP.
State and local statutes and rules may delay or prevent DMLP's
foreclosure on or sale of the mortgaged property and typically
prevent DMLP from receiving net proceeds sufficient to repay all
amounts due on the related mortgage loan (including the Note).
Risks Associated with DMLP's Business Strategy
Lack of Operating History and Experience. DMLP has no operating
history in the mortgage origination industry, which makes it
difficult to evaluate DMLP's anticipated business performance and
future prospects. DMLP was recently formed for the purpose of
investing in the Note. There are no immediate plans for DMLP to
originate and sell mortgages (mortgage banking) in the future to
grow its business. However, DMLP reserves the right to do so.
While DMLP's executive officer (Mr. Keierleber) has had limited
prior mortgage origination and mortgage banking experience, DMLP
has not hired any personnel with experience in the mortgage
banking industry, and there are a significant number of risks and
uncertainties inherent in the mortgage origination industry,
especially in light of DMLP's lack of an operating history and
experience originating mortgages.
Reliance Upon Key Employees. DMLP may not be successful if it
loses the services of key personnel. DMLP expects that the
services of Mr. Keierleber will be important to its future
operations. If DMLP loses the services of key personnel, it may
not be able to achieve its short or long-term objectives or create
or retain DMLP Unit value.
3. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
Set forth below is a summary of certain federal income tax
considerations generally applicable to: (a) the sale of Interests
pursuant to the Offer or the retention of Interests after the
Expiration Date by Limited Partners, (b) information for
retirement plan investors concerning unrelated business taxable
income, (c) termination of the Partnership, and (d) the DMLP
Note Effect on Adjusted Basis of Limited Partners in Partnership
Interests; Gain Recognized by Limited Partners.
This summary is based on the Internal Revenue Code of 1986, as
amended (the Code), and on judicial decisions, U.S. Treasury
regulations (the Regulations), and IRS rulings and other
administrative materials interpreting the Code, all of which are
subject to change, possibly on a retroactive basis. The
authorities on which this summary is based are subject to various
interpretations, and are not binding on the IRS or the courts,
either of which could take a contrary position. No rulings have
been or will be sought from the IRS with respect to the
transactions described herein. Accordingly, there can be no
assurance that the IRS will not challenge the disclosures
expressed herein or that a court will not sustain such a
challenge.
The following summary is for general information only, and the tax
treatment described herein may vary depending upon each Limited
Partners's particular situation. Certain Limited Partners
(including, but not limited to, insurance companies, tax-exempt
organizations, financial institutions or broker/dealers, foreign
corporations, and persons who are not citizens or residents of the
United States) may be subject to special rules not discussed
below. Moreover, the summary does not address the federal income
tax consequences to persons who do not hold the Interests as
capital assets, as defined by Section 1221 of the Code. In
addition, taxes other than federal income taxes, such as foreign,
state and local taxes, and federal estate and gift taxes, may
affect a Limited Partner's investment in the Limited Partnership.
Controversy and uncertainty exist in many areas of the federal
income tax law which may affect the transactions described herein.
Accordingly, there can be no assurance that some of the views
expressed herein will not be challenged by the IRS. The following
information is intended as a general statement of certain tax
considerations, and Limited Partners should not construe this as
legal or tax advice.
LIMITED PARTNERS ARE URGED TO CONSULT AND MUST RELY UPON THEIR OWN
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF A TENDER OF
THEIR INTERESTS PURSUANT TO THE OFFER, INCLUDING THE APPLICABILITY
AND EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, ANY
RECENT CHANGES IN APPLICABLE TAX LAWS AND ANY PROPOSED
LEGISLATION.
A. Sale by Limited Partners.
1. Gain or Loss on Purchase by Offerors.
The receipt of cash by Limited Partners for Interests pursuant to
the Offer will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction under applicable
state, local and other tax laws. The recipient of such payment is
taxable to the extent of any gain recognized in connection with
the sale of the Interests. In general, and subject to the rules
of Section 751 of the Code discussed below; (a) a Limited Partner
will recognize capital gain at the time his Interests are
purchased by the Partnership or Mr. Keierleber to the extent that
the money he receives exceeds his adjusted tax basis in the
Interests, or (b) a Limited Partner will recognize capital loss
at the time his Interests are purchased by the Partnership or Mr.
Keierleber to the extent that the money he receives is less than
his adjusted tax basis in the Interests. Upon a sale of an
Interest pursuant to the Offer, a Limited Partner will be deemed
to receive money in the form of any cash payments to him from the
Partnership or Mr. Keierleber and to the extent he is relieved
from his proportionate share of qualified nonrecourse liabilities,
if any, to which the Partnership's assets are subject. A Limited
Partner will thus be required to recognize gain upon the sale of
his Interests if the amount of cash he actually receives, plus the
amount he is deemed to have received as a result of being relieved
of his proportionate share of Partnership qualified nonrecourse
liabilities (if any), exceeds the adjusted tax basis of the
Limited Partner in the Interests.
2. Adjusted Tax Basis of Interests.
The adjusted tax basis of a Limited Partner's Interests is
calculated by taking his initial basis and making certain
additions and subtractions thereto. The initial basis of a
Limited Partner is the amount paid for his Interests ($1,000 per
Interest for those who purchased in the initial offering). This
initial basis is increased by a Limited Partner's proportionate
share of qualified nonrecourse liabilities to which the
Partnership's assets are subject and by the share of Partnership
taxable income, capital gains and other income items allocated to
the Limited Partner. A Limited Partner's basis is reduced by any
reduction in his proportionate share of qualified nonrecourse
liabilities to which the Partnership's assets are subject, by the
amount of any distributions and by the share of Partnership losses
allocated to the Limited Partner, and by expenditures of the
Partnership not deductible in computing its taxable income and not
properly chargeable to a capital account.
3. Allocation of Partnership Income.
A selling Limited Partner will be allocated a pro rata share of
the Partnership's taxable income or loss for 2003 with respect to
the Interests sold in accordance with the provisions of the
Partnership Agreement concerning transfers of Interests. Such
allocation will affect the Limited Partners's adjusted tax basis
in his Interests and, therefore, the amount of such Limited
Partner's taxable gain or loss upon a sale of Interests pursuant
to this Offer. In addition to the capital gain or loss recognized
on the sale of his Interests pursuant to the Offer, the selling
Limited Partner will be required to take into account such
allocation in computing his federal income tax liability for 2003.
4. Passive Activity Loss Rules.
If a Limited Partner has suspended passive activity losses from
this Partnership or from any other activity, the Limited Partner
may be able to deduct such losses if he or she recognizes a gain
on the sale of Interests pursuant to the Offer. Under Code
Section 469, a noncorporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to
the extent of such individual's passive activity income for such
year, and closely-held corporations may offset such losses against
so-called net active income. A loss recognized by a Limited
Partner upon a sale of less than 100% of his Interests pursuant to
this Offer can be currently deducted (subject to other applicable
limitations) to the extent of such Limited Partner's passive
income from the Partnership for the year of sale or to the extent
of any other passive activity income for that year. To the extent
a Limited Partner recognizes a gain upon a sale of less than 100%
of his Interests, such Limited Partner may deduct current or
carryover passive activity losses, if any, from the Partnership or
from other passive activities to the extent of such gain. If a
Limited Partner disposes of 100% of his Interests pursuant to the
Offer, such Limited Partner generally will be able to deduct his
suspended passive activity losses, if any, from the Partnership
that could not previously be deducted by such Limited Partner due
to the foregoing limitations.
5. Characterization of Gain or Loss on Sale of Interests.
The taxable gain on the disposition of Interests must be allocated
between ordinary income and long term capital gain. Long term
capital gain or loss will be realized on such sale by a Limited
Partner who holds the Interests as capital assets if (a) he or she
is not a dealer in securities; (b) he or she has held the
Interests for longer than 12 months; and (c) the Partnership has
no Section 751 assets. If a Limited Partner who holds the
Interests as a capital asset has held the Interests for 12 months
or less, any gain or loss will be short term capital gain or loss.
To the extent that a portion of the gain realized on the sale of a
Interest is attributable to Section 751 assets (i.e., unrealized
receivables and inventory items which have substantially
appreciated in value) a Limited Partner will recognize ordinary
income, and not a capital gain, upon the sale of an Interest. For
purposes of Section 751 of the Code, depreciation recapture is
treated as if it were an unrealized receivable. Thus, gain, if
any, recognized by a Limited Partner who sells an Interest will be
ordinary income in an amount not in excess of his share of the
Partnership's depreciation recapture. Furthermore, if the
Partnership were deemed to be a dealer in real estate for federal
income tax purposes, the property held by the Partnership might be
treated as inventory items which have substantially appreciated in
value for purposes of Section 751 and a Limited Partner tendering
his Interests would recognize ordinary income, in an amount equal
to his share of the appreciation in value of the Partnership's
real estate inventory. The General Partner does not believe it
has operated the Partnership's business in a manner as to make it
a dealer for tax purposes.
IRS Regulations require certain information to be submitted by a
selling Limited Partner with his income tax return for the year in
which he sells an interest in a partnership having Section 751
assets. Selling Limited Partners must consult with and depend
upon their own tax advisors to determine what information must be
included with their income tax returns by reason of the sale of
Interests.
6. Taxation of Gains and Losses.
A Limited Partner's short-term or long-term capital gain or loss
from the sale of Interests will be combined with such Limited
Partner's other short-term and long-term capital gains and losses
for the tax year to arrive at an overall net short-term or long-
term capital gain or loss. For sales after May 5, 2003, net long-
term capital gains are taxed for federal income tax purposes at a
maximum rate of 15%, except for real estate depreciation recapture
(unrecaptured Section 1250 gain) which is taxed at a maximum
capital gains tax rate of 25%. Short-term capital gains are taxed
at ordinary income tax rates. In addition, any gain on the sale
of Interests attributable to Section 751 will be taxed at ordinary
income tax rates. Generally, for noncorporate taxpayers, ordinary
income recognized in 2003 is taxed at a maximum rate of 35% for
federal income tax purposes. The tax rates may actually be
somewhat higher, depending on the taxpayer's personal exemptions
and amount of adjusted gross income. Net capital losses are
deductible only to the extent of any capital gains plus, in the
case of a noncorporate taxpayer, ordinary income up to $3,000.
Noncorporate taxpayers can carry a net capital loss forward until
it is exhausted. Corporations can carry net capital losses back
three years and forward five years.
Generally, unrecaptured Section 1250 gain is the amount of
depreciation claimed on Section 1250 property (i.e., real
property) which is not recaptured as ordinary income under the
Code Sec. 1250 recapture rules. Depreciation taken into account
in computing unrecaptured Section 1250 gain cannot exceed the
amount of gain recognized on the property after the gain is
reduced by any ordinary income depreciation recapture. Gain on an
item of Section 1250 property which is in excess of any ordinary
income depreciation recapture and unrecaptured Section 1250 gain
is generally taxed at the 15% capital gains rate, for sales after
May 5, 2003.
It is possible that a Limited Partner who was not an original
Limited Partner may have a loss on the sale of his Interests,
depending upon his adjusted basis in the Interests. Such a loss
will be a capital loss if the Interests are a capital asset in the
hands of the Limited Partner.
If a Limited Partner sells all of his Interests in the Partnership
pursuant to the Offer, the excess of: (a) the sum of any loss from
the Partnership for the year of sale (including any previously
suspended Partnership loss) plus any loss realized on the
liquidation, over (b) the net income or gain for the year from all
passive activities (determined without regard to the losses
described in (a)) will be treated as a loss which is not a passive
activity loss. However, the capital loss limitations described
above will continue to apply.
7. Income Tax Withholding.
To prevent back up federal income tax withholding equal to 28% of
the payments made pursuant to the Offer, each Limited Partner who
does not otherwise establish an exemption from such withholding
must notify the Partnership of such Limited Partner's correct
taxpayer identification number (or certify that such taxpayer is
awaiting a taxpayer identification number) and must provide
certain other information by completing a Substitute Form W-9 for
the Partnership. Certain Limited Partners, including
corporations, are not subject to the withholding and reporting
requirements. Foreign Limited Partners are subject to other
requirements. See AProcedure for Tendering Interests.
Gain realized by a foreign Limited Partner on a sale of Interests
pursuant to this Offer will be subject to federal income tax.
Under Section 1445 of the Code and related Regulations, the
transferee of a partnership unit held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of
the amount realized on the disposition. Foreign persons include
alien individuals and foreign corporations, estates, partnerships,
and trusts. The Partnership will withhold 10% of the Offer Price
paid to a tendering foreign Limited Partner. 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.
8. Tax-Exempt Limited Partners
Certain entities, including, but not limited to, trusts formed as
part of corporate stock bonus, pension or profit-sharing plans
that are qualified under Section 401(a) of the Code, and
individual retirement accounts that are qualified under Section
408(a) of the Code (collectively Qualified Plans) are generally
exempt from federal income tax. Qualified Plans, however, are
subject to federal income tax with respect to any unrelated
business taxable income (UBTI). UBTI is income (with specific
exceptions) derived from any trade or business activity, regularly
carried on by a tax-exempt entity (or by a partnership of which it
is a member) that is not substantially related to the entity's
exempt purpose. Thus, to the extent the activity of the
Partnership is unrelated to a Qualified Plan's exempt purpose,
income derived from the Partnership may constitute UBTI to the
Qualified Plan. For any exempt employees supplemental
unemployment benefit plans, trusts, exempt qualified employee
pension, profit-sharing and stock bonus trusts, or non-exempt
trusts, any trade or business conducted by the Partnership will
constitute an unrelated trade or business.
Notwithstanding the foregoing, UBTI does not include, among other
things, gain or loss from the sale or exchange of property, except
to the extent that such gain or loss is derived from debt-financed
property. In general, debt-financed property is any property
which is held to produce income and with respect to which there is
acquisition indebtedness at any time during the tax year or during
the preceding twelve months if the property is disposed of during
the tax year. Acquisition indebtedness includes indebtedness
secured by an existing mortgage on a property that is purchased
subject to the mortgage, even if the indebtedness is not assumed
by the purchaser. In addition, if a Qualified Plan incurred
indebtedness to finance its purchase of an Interest in the
Partnership, that indebtedness would also constitute acquisition
indebtedness. An exception to the acquisition indebtedness rules
exists, provided that various requirements are met, for
indebtedness incurred by certain qualified organizations to
acquire or improve real property. Additional requirements are
imposed under this exception where the indebtedness is incurred by
a partnership in which qualified organizations own an interest.
For purposes of this exception, the term qualified organizations
includes qualified corporate stock bonus, pension or profit-
sharing plans, but does not include IRA's. The Partnership does
have mortgages on the property owned and, therefore, a portion of
the gain or loss, if any, realized by a Qualified Plan on the sale
of an Interest will be UBTI. If a Qualified Plan is not a
"dealer" in securities and if the Qualified Plan did not incur
indebtedness to finance its purchase of an Interest in the
Partnership, then the remaining portion of any gain or loss from
the sale of Interests will not be UBTI unless the Partnership is
deemed to be a "dealer" in real estate. The General Partner does
not believe that the Partnership's business has been operated in
such a manner as to make it a dealer, but there is no assurance
that the Service may not contend that the Partnership is a dealer.
If the Partnership obtains financing to repurchase Interests, the
Internal Revenue Service may contend that each non-redeeming
Limited Partner has acquired an interest in debt-financed
property, in addition to the current debt-financed property of the
Partnership. If the Internal Revenue Service is successful in that
contention, some additional portion of the Partnership's income
allocated to those Limited Partners that are Qualified Plans will
be UBTI.
Any UBTI realized by a Qualified Plan on its sale of an Interest
in the Partnership will be combined with such Qualified Plan's
other UBTI for the tax year. To the extent that a Qualified
Plan's UBTI from all sources exceeds $1,000 for its tax year, such
Qualified Plan will incur a tax liability with respect to such
excess at such tax rates that would be applicable if such
organization were not otherwise exempt from taxation. The trustee
or custodian of a Qualified Plan that owns Interests may be
required to file form 990-T (Exempt Organization Business Income
Tax Return) with the IRS to report UBTI, regardless of the amount
of UBTI recognized by the Qualified Plan. In addition, the
Qualified Plan will be required to pay from the Qualified Plan the
tax on any UBTI in excess of $1,000.
The discussion contained herein is not a complete treatise on the
ownership and disposition of an Interest by Qualified Plans.
There are numerous issues involved and consequently, Qualified
Plans should consult with and must rely upon their own tax
advisors concerning the application of federal income tax laws.
9. Example for Limited Partners.
Each Limited Partner must determine his own adjusted tax basis, as
the adjusted tax basis will vary depending upon when the Limited
Partner purchased the Interests and the amount of distributions
received for each Interest, which varies depending upon the day
admitted to the Partnership.
Set forth below are estimates of adjusted basis, gain or loss on
disposition of Interests, suspended passive activity losses under
Section 469, Section 751 gain and unrecaptured Section 1250 gain
for a hypothetical Limited Partner. The estimates assume that the
hypothetical Limited Partner acquired his Interest in the original
offering and made capital contributions of $1,000. The
computation is based upon amounts estimated as of September 30,
2003, because the Partnership Agreement recognizes transfers of
Interest on the first day of each quarter for tax allocation
purposes.
The General Partner estimates that as of September 30, 2003, there
will be nonrecourse debt attributed to the Interests in the
approximate amount of $26,363,236. Therefore, in determining the
tax consequences of accepting the Offer, a Limited Partner that
sells one Interest will be deemed to receive the Offer Price of
$910 cash plus a pro rata share of the Partnership's nonrecourse
debt (approximately $2,569 per Interest) (together, the selling
Price).
The General Partner estimates that as of September 30, 2003, the
adjusted tax basis of each Interest held by the hypothetical
original taxable Limited Partner, based on the tax returns filed
by the Partnership and based on estimates for the year 2003,
ranges from $2,075 to $2,214 per Interest (on average), computed
as follows:
Estimated Current Basis per Interest
For Taxable Limited Partners (Average)
1986 1987 1988
Purchase Purchase Purchase
Original capital contribution $1,000 $1,000 $1,000
Ordinary income (1986 to 2002) 56 56 40
Interest income (1986 to 2002) 186 186 148
Section 1231 gain (2002) 132 132 132
Estimated 2003 ordinary income 4 4 4
Estimated 2003 interest income 7 7 7
Proportionate share of nonrecourse
debt 2,569 2,569 2,569
3,954 3,954 3,900
Less: Net rental losses (1986 - 2002)(577) (577) (509)
Less: Investment interest expense
(1989 - 2002) (142) (142) (142)
Less: Section 1231 loss (1994) (55) (55) (55)
Less: Cash distributions (1986-2002) (970) (888) (845)
Less: Estimated 2003 rental loss (127) (127) (127)
Less: Estimated 2003 investment
interest expense (8) (8) (8)
Estimated current basis per Interest $2,075 $2,157 $2,214
The General Partner estimates that as of September 30, 2003, the
adjusted tax basis of each Interest held by the hypothetical
original tax-exempt Limited Partner, based on the tax returns
filed by the Partnership and based on estimates for the year 2003,
ranges from $2,892 to $2,959 per Interest (on average), computed
as follows:
Estimated Current Basis per Interest
For Tax-Exempt Limited Partners (Average)
1986 1987 1988
Purchase Purchase Purchase
Original capital contribution $1,000 $1,000 $1,000
Ordinary income (1986 to 2002) 56 56 40
Rental income 407 383 383
Interest income (1986 to 2002) 186 186 148
Section 1231 gain (2002) 132 132 132
Estimated 2003 rental income 4 4 4
Estimated 2003 interest income 7 7 7
Proportionate share of nonrecourse
debt 2,569 2,569 2,569
4,361 4,337 4,283
Less: Net rental losses
(1986 - 2002) (207) (207) (187)
Less: Investment interest
expense (1989 - 2002) (142) (142) (142)
Less: Section 1231 loss (1994) (55) (55) (55)
Less: Cash distributions
(1986-2002) (970) (888) (845)
Less: Estimated 2003 rental loss (87) (87) (87)
Less: Estimated 2003 investment
interest expense (8) (8) (8)
Estimated current basis per
Interest $2,892 $2,950 $2,959
Under the foregoing and utilizing the estimated adjusted tax
basis, the hypothetical original taxable Limited Partner whose
Interests are purchased in this Offer would recognize a taxable
gain for federal income tax purposes of approximately $1,265 to
$1,404 per Interest (on average) as follows:
Estimated Taxable Gain
For Taxable Limited Partners (Average)
1986 1987 1988
Purchase Purchase Purchase
Cash for Interests $ 910 $ 910 $ 910
Relief from qualified
nonrecourse liabilities 2,569 2,569 2,569
Selling price 3,479 3,479 3,479
Subtract basis (computed above) (2,075) (2,157) (2,214)
Estimated taxable gain $ 1,404 $ 1,322 $ 1,265
Under the foregoing and utilizing the estimated adjusted tax
basis, the hypothetical original taxable Limited Partner whose
Interests are purchased in this Offer would recognize a gain of
approximately $520 to $587 per Interest (on average) as follows:
Estimated Realized Gain
For Tax-Exempt Limited Partners (Average)
1986 1987 1988
Purchase Purchase Purchase
Cash for Interests $ 910 $ 910 $ 910
Relief from qualified
nonrecourse liabilities 2,569 2,569 2,569
Selling price 3,479 3,479 3,479
Subtract basis
(computed above) (2,892) (2,950) (2,959)
Estimated realized gain $ 587 $ 529 $ 520
Subject to Section 751, such a gain will be capital gain if the
Interests are a capital asset in the hands of the hypothetical
Limited Partner.
The General Partner estimates that the amount of suspended
passive activity losses from the Partnership in the case of the
hypothetical original taxable Limited Partner will be
approximately $138 per Interest (on average) for a 1986 purchase,
$138 per Interest (on average) for a 1987 purchase, $131 per
Interest (on average) for a 1988 purchase, unless such losses
have previously been utilized by the hypothetical Limited
Partner. Under this assumption, in addition to recognizing a
taxable gain ranging from $1,265 to $1,404 per Interest (on
average), such Limited Partner will be allowed to deduct
suspended passive activity losses attributable to the Partnership
ranging in the amount of from $131 to $138 per Interest (on
average).
The depreciation recapture attributed to the Interests of taxable
Limited Partners is estimated to be in the approximate amount of
$822,000 as of September 30, 2003. Therefore, under Section 751,
in determining the tax consequences of accepting the Offer, the
original taxable Limited Partner's taxable income will be deemed
to include approximately $91 of ordinary income per Interest,
with the balance of the taxable gain considered being capital
gain for federal income tax purposes for the hypothetical Limited
Partners who hold their Interests as capital assets.
The unrecaptured Section 1250 gain attributable to the Interests
of taxable Limited Partners is estimated to be in the approximate
amount of $8,433,000 as of September 30, 2003. Therefore, in
determining the tax consequences of accepting the Offer,
approximately $932 of the taxable gain, if any, per Interest for
taxable Limited Partners will be considered to be capital gain
taxed as real estate depreciation recapture, and thus subject to
a maximum capital gains rate of 25%.
The examples contained herein are for purposes of illustration
only. The actual taxable gain (loss) for any particular Limited
Partner will likely vary from the estimates provided herein. The
foregoing computations include estimates of the allocated
portions of items attributable to 2003 (including, but not
limited to, interest income, passive activity losses,
Partnership nonrecourse debt, Section 751 gain). Actual taxable
gain (loss) must be computed using actual amounts of allocated
items. In addition, actual taxable gain (loss) will vary
depending on each Limited Partner's particular circumstances.
For example, if a current Limited Partner acquired a Interest
from another Limited Partner rather than in the initial Offering
of Interests, the current Limited Partner's basis for his
Interests is most likely not in the range of $2,075 to $2,214
(the amounts shown above).
B. Retention of Interests by Limited Partners.
There will be no immediate tax consequences to Limited Partners
with respect to Interests that are not tendered in this Offer.
However, Limited Partners who retain their Interests may,
henceforth, have a proportionately greater interest in the items
of Partnership income and loss and in distributions by the
Partnership because each remaining Interest may represent a
greater percentage of the total Interests outstanding depending
upon the number of Interests purchased by the Partnership
pursuant to the Offer. The extent of the change in proportionate
Interests will depend upon the number of Interests tendered and
purchased by the Partnership.
Limited Partners who own Interests that are not repurchased will
have income or loss allocated to them by the Partnership for
2003. As discussed above, suspended passive activity losses, if
any, can be used to reduce the impact of taxable income, if any,
allocated for 2003.
C. Termination of the Partnership.
In general, the Code provides that if 50% or more of the
total capital and profits interests in a partnership are
sold or exchanged within a single 12-month period, the
partnership will terminate for tax purposes. This rule
would apply to purchases by the General Partner and by an
affiliate of the General Partner, but would not apply to
redemptions of Interests by the Partnership. Thus, if
Interests representing 50% or more of the total capital
and profits interests in the Partnership are purchased by
the General Partner, or affiliates, or third parties
within a 12-month period (excluding successive transfers
of the same Interests), the Partnership would terminate
for federal income tax purposes. The General Partner
does not intend to purchase Interests pursuant to the
Offer representing 50% or more of the total capital and
profits interests in the Partnership so as to cause a
termination of the Partnership. In addition, the General
Partner does not intend to allow the purchase of
Interests that, when combined with the Offer, would be a
transfer of 50% or more of the total capital and profits
interest in the Partnership. As a result, the General
Partner will deny any transfer during the term of this
Offer. However, there can be no assurance that a
termination will not occur as a result of the Offer.
Whether a termination will occur depends, in part, upon
the ratio of whole Interests purchased to the number of
Fractional Interests purchased. Until the Offer is
complete, this determination cannot be made. Moreover,
pursuant to the Offer, the Partnership will redeem up to
the equivalent of 100 Interests. Mr. Keierleber, an
affiliate of the General Partner, will then purchase up
to the equivalent of 3,400 additional Interests. If more
than the equivalent of 3,400 Interests are tendered
pursuant to the Offer, the Partnership, in its sole
discretion, may increase the number of Interests to be
purchased in this Offer to permit the redemption of all
of the remaining Interests tendered. If both redemptions
by the Partnership are combined for purposes of
determining whether a termination has occurred, the
purchases by Mr. Keierleber may cause a termination of
the Partnership, unless the number of Interests purchased
by Mr. Keierleber are reduced. Applicable law, however,
provides no guidance concerning whether the redemptions
by the Partnership will be combined. Accordingly, it is
uncertain whether a termination would result.
If a termination occurs, the Partnership is deemed to
contribute all of its assets and liabilities to a new
partnership in exchange for an interest in the new
partnership, and, immediately thereafter, the terminated
partnership is deemed to distribute Interests in the new
partnership to the remaining partners in proportion to
their respective Interests in the terminated partnership
in liquidation of the terminated partnership. In
general, the following adverse tax consequences may
result:
(a) The Partnership's taxable year will end upon a
termination and, if a Limited Partner's taxable year
differs from the Partnership's calendar taxable year, the
termination could result in the inclusion of more than
one year of Partnership income or loss in the Limited
Partner's income tax return for the taxable year in which
the Partnership terminates.
(b) The treatment of Partnership liabilities is uncertain.
The applicable Regulations provide no guidance as to the
effect of the constructive contribution to the new
partnership of the liabilities of the terminated
partnership. The Code generally provides that the
reduction of liabilities of a partnership is treated as
a distribution of money to the partners in proportion as
they share in those liabilities, resulting in a reduction
in the adjusted basis of their partnership Interests, and
in the realization of gain if the deemed distribution
exceeds the adjusted basis in their partnership
Interests. However, the reduction in the partners'
shares of liabilities of the terminated partnership
should be offset by their shares of the liabilities of
the new partnership by reason of the distribution of the
Interests in the new partnership. Unfortunately,
applicable law does not specifically provide for this
treatment. Accordingly, there can be no assurances that
gain would not be realized if the deemed distribution of
money exceeded a Limited Partner's adjusted basis in his
Interests.
The Partnership does not anticipate allowing the year to
terminate and may delay any transfers to avoid this
problem.
D. DMLP NoteCEffect on Adjusted Basis of Limited Partners in
Partnership Interests; Gain Recognized by Limited
Partners.
For purposes of determining a partner's adjusted basis in
his partnership interest, a partner is allocated a
nonrecourse liability in its entirety to the extent such
partner bears the economic risk of loss for such
partnership liability. Under the Regulations, a partner
bears the economic risk of loss for a partnership
liability to the extent that the partner or a related
person makes (or acquires an interest in) a nonrecourse
loan to the partnership. Among other relationships, a
partnership is related to a partner if the partnership
and the partner bear a relationship to each other in
which such partner owns, directly or indirectly, more
than 80 percent of the capital interest or profits
interest in such partnership.
Jeffrey Keierleber, a Limited Partner, currently
beneficially owns 80.4% of DMLP. As additional Interests
are purchased by Mr. Keierleber, his beneficial ownership
of the Note will also increase. If possible, the
Partnership will attempt to purchase additional DMLP
Units before December 31, 2003, to reduce Mr.
Keierleber's beneficial interest in the Note to less than
80%. However, failure to do so will cause the entire
liability under the Note to be allocated to Mr.
Keierleber for purposes of determining a Limited
Partner's adjusted basis.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY. EACH LIMITED
PARTNER IS URGED TO CONSULT THEIR OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED
PARTNER (INCLUDING THE APPLICABILITY AND EFFECT OF THE
CONSTRUCTIVE OWNERSHIP RULES AND FOREIGN, STATE, AND
LOCAL TAX LAWS) OF THE DISPOSITION OF INTERESTS PURSUANT
TO THE OFFER.
4. FAIRNESS OF THE TRANSACTION; REPORTS, OPINIONS,
APPRAISALS AND CERTAIN NEGOTIATIONS; NO APPROVALS
REQUIRED; NO APPRAISAL RIGHTS.
The Offerors reasonably believe that the terms of the
Offer are fair to unaffiliated Limited Partners,
principally because the Offer provides an opportunity for
Limited Partners to receive cash for their Interests on
a voluntary basis at a price that exceeds the reported
third party trading prices of the Interests since January
1, 1997. The General Partner has approved the
Partnership's participation in the Offer. See AThe
Offer-Introduction-Certain Effects of the Offer. The
Purchase Price was determined by the Offerors to
represent an attractive price. In determining this price,
the Offerors considered the following factors:
(a) There is no liquid market for the Interests;
(b) That the Partnership is currently not making
distributions;
(c) The Offerors' personal expectations that the value of the
Partnership's property will increase in the future;
(d) The assumed price of selling the Properties, adjusted for
estimated selling, liquidation and other related costs;
(e) The independent appraisals received on the Apartments in
2002;
(f) The purchase price paid by the Partnership for the Office
Buildings in 2002;
(g) The prepayment penalties that would be incurred if the
Properties were sold and the mortgages were paid off;
(h) The offers received on the Apartments;
(i) The per Interest price paid to Limited Partners in
previous repurchases over the last three years (between
$550-$895). See AThe OfferCIntroductionC Determination
of the Purchase Price;
(j) The per Interest price paid to Limited Partners in
secondary market transactions in which the Offerors did
not participate, and of which the Offerors are aware over
the last three years at prices ranging from $500 to $551
per Interest. See AThe Offer-Introduction-Determination
of the Purchase Price;
(k) An unaffiliated March 2002 offer of $550 per Interest for
a limited number of Interests; and
(l) The net book value and liquidation value of the
Interests.
See AThe OfferCIntroductionCDetermination of the Purchase
Price.
Furthermore, the Offerors believe that the Offer is fair
in the sense that the decision of whether to accept the
Offer is voluntary on the part of each Limited Partner.
See AThe Offer-Introduction-Determination of the Purchase
Price.
In determining the fairness of the transaction to Limited
Partners, the Offerors did not consider the going concern
value of the Partnership. Additionally, there are no
firm offers by unaffiliated third parties of which the
Offerors are aware for the merger or consolidation of the
Partnership, the sale or transfer of all of the
Partnership's assets or the purchase of the Interests
which would enable the holder to control the Partnership
upon which the Offerors could evaluate the fairness of
this Offer.
FAIRNESS OPINION
In April 2003, the Partnership asked the Valuations Group,
Inc. (AThe Valuations Group) to deliver an opinion in connection
with the fairness of the Purchase Price. The Partnership selected
the Valuations Group for its familiarity and experience with
valuing limited partnership interests, its independence from the
Offerors, and the price and scheduling terms on which it agreed to
perform its services.
The Valuations Group efforts are directed by Michael Phelan,
the company's co-founder and president. Mr. Phelan has over 15
years in the valuation of real estate limited partnerships
interests and oversees or directly performs the valuation of
approximately 400 partnership interests annually. For more
detailed information regarding Mr. Phelan's qualifications, see
Section 111 of the Fairness Opinion attached hereto as Exhibit D.
The Valuations Group provided similar opinions for the
Partnership's October 1996 and April 2002 tender offers. With the
exception of the 2002 Fairness Opinion, there has been no material
relationship between (i) the Valuations Group, and (ii) the
Offerors or their affiliates at any time during the past two years.
The Offerors placed no limits on the scope of analysis and
investigation. The Offerors originally determined the Purchase
Price of $910 per Interest. In May 2003 the Partnership was orally
informed, and on June 3, 2003, it confirmed in writing, that on
such date the Valuations Group concluded that $910 per Interest was
fair to Limited Partners from a financial point of view. The
Valuations Group's opinion is not required to be updated after the
date of this Offer to take account of any subsequent material
developments, if any, which may thereafter occur or may come to its
attention. The written opinion will also be made available for
inspection and copying at the principal offices of the Partnership
during its normal business hours. Limited Partners are urged to
read this opinion in its entirety.
In rendering its opinion, The Valuations Group relied, in
part, without independent verification, on the accuracy and
completeness of all appraisal, financial and other information
provided to it by the Offerors. The Valuations Group did not make
or obtain appraisals of the Partnership's assets, but relied upon
the appraisals dated April 8, 2002 of Pelican Sound and
September 27, 2002 of Town Place and did not solicit third parties
who might be interested in acquiring all or a part of the
Partnership or its underlying real estate assets. The Valuations
Group reviewed the appraisals and believes the methodology, key
assumptions and resulting conclusions in each appraisal to be both
reasonable and adequately documented. The Valuations Group relied
on the July 2002 property acquisition price of Plymouth and
Spectrum. This conclusion is based on a recent date of the
acquisition, a review of the subsequent operating performance of
the Office Buildings, and post-acquisition market trends. During
2002, the Partnership invested in DMLP which was created for the
primary purpose of purchasing the mortgage note that encumbers the
Office Buildings. The Partnership owns a 48.7% interest in DMLP
and accounts for this investment under the equity method of
accounting. The Partnership's allocated equity in the mortgage
note receivable, as indicated in the Partnership's First Quarter
2003 Quarterly Report is considered by Partnership management to be
an accurate reflection of the Partnership's equity value in DMLP
and, The Valuations Group believes, forms a reasonable basis as to
the current equity value of the Partnership's interest in DMLP as
of the date of the Offer.
In reaching its conclusions about the fairness of the Offer,
The Valuations Group utilized a variety of valuation techniques and
performed a number of analyses of relevant information. In forming
its opinion, the Valuations Group has reviewed the Partnership's
recent Securities and Exchange Commission filings, property
operating budgets, and data published in real estate industry
publications. Prior to being engaged to provide this opinion in
connection with the fairness of the Purchase Price, in June, 2002
the Valuations Group prepared an independent opinion of value of
the Interests for a client unrelated to the Offerors. In that
opinion, the Valuations Group concluded that $899 per Interest was
the fair market value for an Interest; however, the Valuations
Group's current valuation based on the same methodology applied
using information available as of June 3, 2003 is now $758 per
Interest. The difference arises principally from a reduction in
the appraisal value of Town Place of $1,100,000, the Partnership's
cash needs in excess of operating income during the intervening
period, and an increase in the fractional interest discount
derivation from 35% in June 2002 to 36.25% at present. The
increase in the fractional interest discount derives entirely from
the added analytical/valuation complexity resulting from the
Partnership's intra-period acquisition of two occupancy-impaired
(non-stabilized) office buildings. Such transactions, in the
judgment of The Valuation Group, tend to confuse secondary
purchasers of limited partnership interests as to future value and
cash flow, and, accordingly result in higher discounts to the
estimated net asset value of partnerships in which such
transactions have recently occurred.
The principal methods, techniques and their outcome supporting
the opinion are summarized in the following paragraphs.
As part of the review, the Valuations Group sought information
about recent sales of the Interests. The Valuations Group, based
upon information from the Offerors and its own research, found that
6,634.48 Interests in the Partnership were transferred during the
2002 fiscal year. These transactions, which involved purchases by
the Partnership and Jeffrey L. Keierleber, occurred at prices
ranging from a low of $550 per Interest to a high of $895 per
Interest. The Purchase Price in the Offer exceeds the range of all
recent transactions presently known to the Valuations Group.
As part of its analysis in support of its opinion, the
Valuations Group derived an estimate of the Partnership's net asset
value per Interest. This estimate, which the Valuations Group
believes to be reasonable based on its analysis of Partnership
information, represents the dollar amount in cash which could be
available for distribution to the Partnership's Limited Partners,
stated on a per Interest basis, if the Partnership's two apartment
properties were sold at their appraised value, the office
properties were sold at a price equal to their 2002 cost, its
investment in DMLP is fully recovered, and the Partnership's
outstanding liabilities were satisfied as of March 31, 2003. Net
asset value per Interest is equal to the aggregate estimated
property value, less selling costs and repayment of debt, plus net
other assets (e.g., cash, receivables, less payables, etc.). This
amount does not consider all of the costs of liquidating the
Partnership, completing all of the filings required by the
Securities and Exchange Commission or other agencies, or the costs
of conducting this Offer. Based upon its analysis, the Valuations
Group derived a net asset value of $1,189 per Interest. The
Purchase Price of $910 per Interest, which considers the estimated
costs of liquidating the Partnership (and other related costs), is
an approximate 23.5% discount to this derived net asset value.
The Valuations Group also considered that fractional, non-
controlling interests in limited partnerships typically trade at
discounts to the partnership's net asset value. These discounts
are often substantial and reflect investor preferences for a
partnership's unique investment characteristics. The Valuations
Group has applied discounts and premiums to net asset value based
upon internally derived weightings which represent the Valuations
Group's subjective judgment as to the relative influence of a
number of key factors on the value of a non-controlling, minority
interest in the Partnership. These relative influences are
reflected as additions to or subtractions from net asset value and
are expressed as premiums or discounts applied thereto. In
deriving the applicable discount for a non-controlling, minority
interest in the Partnership, The Valuations Group looked at the
following factors: secondary market liquidity and investment
control, cash flow and distributions, asset type and quality,
management capabilities and fee structure, market capitalization,
portfolio diversification, liquidation time horizon, recent
historical performance, analytical complexity, and financial
leverage. Factors that figured most prominently in deriving the
discount appropriate to estimate the price for a non-controlling
interest in the Partnership were: (i) the low volume of secondary
market trading activity involving unrelated purchasers; (ii)
negative cash flow and lack of current distributions; (iii)
uncertainty as to management's liquidation plans; and, (iv)
uncertainty as to the timing and costs associated with the lease-up
of the Partnership's recently acquired commercial properties. The
Valuations Group, applying the fractional interest discount
approach derived a value of $758 per Interest which represents
approximately a 36.25% discount from net asset value (a 27.5%
discount for lack of marketability and control, a 2.5% discount for
weak cash flow and distribution characteristics, a 5.0% discount
for uncertainty regarding the Partnership's liquidation plans and
risks associated with potential future reinvestment, and a 1.25%
discount for analytical complexity due to recent property
transactions involving occupancy impaired properties with no
operating history). The 2002 Discount Study published by
Partnership Profiles, Inc. (APartnership Profiles) indicated that
equity partnerships reporting moderate to high debt levels making
distributions traded at an average discount of 26% during the two
month period ending May 31, 2002, while non-distributing equity
partnerships reported an average discount of 32%. The Valuations
Group believes the discount spread between its discount
determination and the discounts reported by Partnership Profiles is
warranted due to substantial uncertainty regarding the
Partnership's future liquidation plans, risk associated with
potential reinvestment, and uncertain cash flow and distribution
characteristics compared to the partnerships included in the study.
These analyses, taken as a whole, led the Valuations Group to
conclude that the Purchase Price of $910 per Interest is fair to
Limited Partners from a financial point of view. The preparation
of the fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Selecting
portions of the analyses in the summary set forth above, without
considering the analyses as a whole, could create an incomplete
view of the processes underlying the Valuations Group's opinion.
No partnership or transaction used in the above analysis as a
comparison is identical to the Partnership or the contemplated
Offer. In arriving at its fairness determination, the Valuations
Group considered the results of all such analyses and did not
assign any particular weight to the results of any particular
analysis. The analyses were prepared for the purpose of enabling
the Valuations Group to provide its opinion as to fairness and do
not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold.
As compensation for financial advisory services rendered in
connection with the Offer, the Partnership has paid the Valuations
Group a fee of $10,000, whether or not the Offer is consummated.
APPRAISAL OF APARTMENTS -- PELICAN SOUND AND TOWN PLACE
In order to provide limited partners with information on the
value of its remaining holdings, the Partnership has obtained
appraisals of its two Apartments. The appraisals were performed by
an independent appraiser, Riggins, Atkinson, Combs & Associates,
Inc. ("Riggins, Atkinson"). The appraiser was selected on the
basis of its general qualifications and cost. Riggins, Atkinson is
a Florida certified general real estate appraiser. Riggins,
Atkinson previously performed similar services for the Partnership
and for other partnerships sponsored by the General Partner and its
affiliates. However, there is no material relationship between (i)
the appraiser, its affiliates and representatives, and (ii) the
Partnership, Jeffrey Keierleber or their affiliates. No
limitations were imposed on the scope of the investigation of the
appraiser for either appraisal; however, it was agreed that the
cost approach would not be used because of time constraints. The
appraisals are filed as exhibits with the Schedule T0 filings made
by the Partnership and Jeffrey Keierleber with the SEC. The
appraisals will be made available for inspection and copying at the
principal offices of the Partnership during its normal business
hours. Limited Partners may also request a copy of the appraisal
at no cost, in writing, addressed to the Partnership at its
offices.
April 2002 Appraisal of Pelican Sound
Riggins, Atkinson appraised this property at $19,000,000 as of
April 8, 2002. In preparing the appraisal, Riggins, Atkinson
utilized two basic techniques for estimating market value: income
capitalization, and sales comparison, each of which derived a
different value. The results of these two approaches are
Sales Comparison $19,000,000
Income Capitalization $19,300,000
These approaches were then reconciled to a final estimate of
value of $19,000,000.
The income capitalization approach is based upon the
premise that a prudent investor would pay no more for the
subject property than for another investment with similar
risk and return characteristics. The income
capitalization approach converts anticipated benefits to
be derived from the ownership of property into a value
estimate. Anticipated future income and/or reversions
are discounted to a present worth figure through the
capitalization process. This approach is based on the
premise that income producing real estate is typically
purchased as an investment, and that from the investor's
point of view earning power is the critical element
affecting property value. An investor who purchases
income producing property is essentially trading present
dollars for the right to receive future dollars. This
approach focuses on how change affects the value of
income producing properties. The income capitalization
approach provides a value indication by converting these
anticipated future benefits and the various accompanying
changes into a current value. This conversion process
can be accomplished by either direct or yield
capitalization methods. This amount is capitalized at a
rate that should reflect the risk to the investor and the
amount of income necessary to support debt service or the
mortgage requirement. Riggins, Atkins used three rent
comparable properties for its analysis using the income
capitalization approach.
The sales comparison approach estimates value based on
comparison to prices paid in actual market transactions
for similar properties. The primary factors used in
finding similar properties were age and quality of the
properties, the date of sale and the location. Riggins,
Atkins found eight comparable sales in its research and
cited to four within its report. The Appraisal report
contains additional information on properties which were
determined to be comparable. Adjustments were then made
for differences in terms of the sale, financing, market
conditions, and physical and economic characteristics.
This approach is based on the principle of substitution,
which implies that a prudent investor will not pay more
to buy a property than it would cost to buy a comparable
substitute property in a similar location. Using this
approach, Riggins, Atkinson opined that an estimated
market value would be based on $73.00 a square foot,
$16,000 a room and $51,000 a Unit.
Utilizing these techniques, the appraiser concluded
$19,000,000 was the fair value of Pelican Sound. There can be no
assurances that Pelican Sound will sell for an amount equal to, or
greater than, the appraised amount. Each technique or approach to
value has its strengths and weaknesses, depending to a large extent
on the type of property being appraised and the quality of
available data.
The appraiser's underlying analysis, supporting documents and
additional information on each of the two valuation approaches is
set forth in the Appraisal report, which is available for
inspection and copying upon request. For further information on
the sales comparison approach, Limited Partners should review the
section of the Appraisal captioned "Sales Comparison Approach."
For information on the income capitalization approach, including
the estimates and assumptions thereunder, including the discount
rate, Limited Partners should review the section of the Appraisal
captioned "Income Capitalization Approach."
This value is consistent with the Offerors' estimate of the
property as described in the Offer to Purchase.
April 2002 Appraisal of Town Place
Riggins, Atkinson appraised the property at $11,500,000 as of
April 8, 2002. In preparing the appraisal, Riggins, Atkinson
utilized two basic techniques for estimating market value: income
capitalization, and sales comparison, each of which derived a
different value. The results of these two approaches are
Sales Comparison $11,500,000
Income Capitalization $11,300,000
These approaches were then reconciled to a final estimate of
value of $11,500,000. In calculating its final estimate, Riggins,
Atkinson stated that the sales comparison and income capitalization
approaches indicate similar value conclusions and are supported by
market evidence.
The income capitalization approach is based upon the
premise that a prudent investor would pay no more for the
subject property than for another investment with similar
risk and return characteristics. The income
capitalization approach converts anticipated benefits to
be derived from the ownership of property into a value
estimate. Anticipated future income and/or reversions
are discounted to a present worth figure through the
capitalization process. This approach is based on the
premise that income producing real estate is typically
purchased as an investment, and that from the investor's
point of view earning power is the critical element
affecting property value. An investor who purchases
income producing real estate is essentially trading
present dollars for the right to receive future dollars.
This approach focuses on how change affects the value of
income producing properties. The income capitalization
approach provides a value indication by converting these
anticipated future benefits and the various accompanying
changes into a current value. This conversion process
can be accomplished by either direct or yield
capitalization methods. This amount is capitalized at a
rate that should reflect the risk to the investor and the
amount of income necessary to support debt service or the
mortgage requirement. Riggins, Atkins used three rent
comparable properties for its analysis using the income
capitalization approach.
The sales comparison approach estimates value based on
comparison to prices paid in actual market transactions
for similar properties. The Appraisal report contains
additional information on properties which were
determined to be comparable. Riggins, Atkins found eight
comparable sales in its search and cited to four within
the Appraisal report. Adjustments were then made for
differences in terms of the sale, financing, market
conditions, and physical and economic characteristics.
This approach is based on the principle of substitution,
which implies that a prudent investor will not pay more
to buy a property than it would cost to buy a comparable
substitute property in a similar location. Using this
approach, Riggins, Atkins opined that an estimated market
value would be based on $57.00 a square foot, $13,500 a
room and $48,000 a Unit.
Utilizing these techniques, the appraiser concluded
$11,500,000 was the fair value of Town Place. There can be no
assurances that Town Place will sell for an amount equal to, or
greater than, the appraised amount. Each technique or approach to
value has its strengths and weaknesses, depending to a large extent
on the type of property being appraised and the quality of
available data.
The appraiser's underlying analysis, supporting documents and
additional information on each of the two valuation approaches is
set forth in the Appraisal report, which is available for
inspection and copying upon request. For further information on
the market or sales comparison, Limited Partners should review the
section of the Appraisal captioned "Sales Comparison Approach."
For information on the income capitalization approach, including
the estimates and assumptions thereunder, including the discount
rate, Limited Partners should review the section of the Appraisal
captioned "Income Capitalization Approach."
The Offerors are not aware of any license or regulatory permit
that appears to be material to the Partnership's business that
might be adversely affected by their acquisition of Interests as
contemplated in the Offer or of any approval or other action by any
government or governmental, administrative or regulatory authority
or agency, domestic or foreign, that would be required for the
Offerors' acquisition or ownership of Interests pursuant to the
Offer. Except for the Wisconsin filing and exemption request which
is pending, should any such approval or other action be required,
the Offerors currently contemplate that they would seek such
approval or other action.
There is no vote of Limited Partners required in connection
with the Offer and there are no appraisal rights available to
Limited Partners in connection with the Offer. The General Partner
of the Partnership has informed the Offerors that the Partnership
has not retained, and does not intend to retain, an unaffiliated
representative to act solely on behalf of unaffiliated Limited
Partners.
Certain historical financial information regarding the
Partnership and certain information regarding its property is
incorporated herein by reference to the Partnership's Form 10-KSB
for the year ended December 31, 2002 and the Partnership's Form 10-
QSB for the quarter ended March 31, 2003. See AThe
OfferCMiscellaneous for information on how to obtain a copy of the
Form 10-KSB. Our pro forma financial information is included in
Appendix A to this Offer.
5. NUMBER OF INTERESTS; EXPIRATION DATE; EXTENSION OF THE
OFFER.
On the terms and subject to the conditions described herein
and in the Letter of Acceptance, the Offerors will purchase up to
3,500 Interests that are validly tendered on or prior to the
Expiration Date (and not properly withdrawn in accordance with
Section 7B Withdrawal Rights) at the Purchase Price. The later of
Midnight, Central time, on August 13, 2003, or the latest time and
date to which the Offer is extended, is referred to herein as the
AExpiration Date. The Offer is not conditioned on any minimum
number of Interests being tendered.
If (i) the Offerors increase or decrease the price to be paid
for Interests or decreases the number of Interests being sought and
(ii) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and
including, the date that notice of such increase or decrease is
first published, sent or given in the manner described in: AThe
OfferCExtensions of Tender Period; Termination; Amendments, the
Offer will be extended until the expiration of ten business days
from the date of publication of such notice.
The Offerors also expressly reserve the right, in their sole
discretion, at any time or from time to time, to extend the period
of time during which the Offer is open by giving oral or written
notice of such extension to the Partnership and Limited Partners
and making a public announcement thereof. See AThe OfferCExtension
of Tender Period; Termination; Amendments. There can be no
assurance, however, that the Offerors will exercise their right to
extend the Offer.
For purposes of the Offer, a Abusiness day means any day other
than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, Central time.
Copies of this Offer and the Letter of Acceptance are being
mailed to Limited Partners by the Offerors.
6. PROCEDURE FOR TENDERING INTERESTS.
A. Proper Tender of Interests.
To tender Interests validly pursuant to the Offer, a properly
completed and duly executed Letter of Acceptance or photocopy
thereof, together with any required signature guarantees and any
other documents required by the Letter of Acceptance, must be
received by the Partnership at the address set forth in the Letter
of Acceptance.
Federal backup withholding. To prevent back-up federal income
tax withholding equal to 28% of the gross payments made pursuant to
the Offer, each tendering Limited Partner must notify the Offeror
of such Limited Partner's correct taxpayer identification number
and provide certain other information by properly completing the
substitute form W-9 included in the letter of Acceptance. Foreign
limited partners may be required to submit a properly completed
form W-8, certifying non-United States status, in order to avoid
backup withholding. In addition, foreign stockholders may be
subject to 10% (or lower treaty rate) withholding on gross payments
received pursuant to the Offer. For a discussion of certain federal
income tax consequences to tendering Limited Partners, see AThe
OfferBCertain Federal Income Tax Considerations. Each Limited
Partner is urged to consult with his or her own tax adviser.
B. Determinations of Validity.
All questions as to the Purchase Price, the form of documents
and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Interests will be
determined by the Offerors, in their sole discretion, and such
determination shall be final and binding. The Offerors reserve the
absolute right to reject any or all tenders of Interests that it
determines are not in proper form or the acceptance for payment of
or payment for Interests that may, in the opinion of the Offerors'
counsel, be unlawful. The Offerors also reserve the absolute right
to waive any defect or irregularity in any tender of Interests.
Neither the Offerors nor any other person will be under any duty to
give notice of any defect or irregularity in tenders, nor shall any
of them incur any liability for failure to give any such notice.
C. Rule 14E-4.
It is a violation of Rule 14e-4 promulgated under the Exchange
Act for a person to tender Interests for his or her own account
unless the person so tendering (i) has a net long position equal to
or greater than the amount of Interests tendered and (ii) will
cause such Interests to be delivered in accordance with the terms
of the Offer. The tender of Interests pursuant to the procedures
described above will constitute the tendering Limited Partner's
representation and warranty that (i) such Limited Partner has a net
long position in the Interests being tendered within the meaning of
Rule 14e-4 promulgated under the Exchange Act, and (ii) the tender
of such Interests complies with Rule 14e-4. The Offerors'
acceptance for payment of Interests tendered pursuant to the Offer
will constitute a binding agreement between the tendering Limited
Partner and the Offerors on the terms and subject to the conditions
of the Offer.
D. Proration.
This Offer is for 3,500 Interests and upon the terms and
subject to the conditions of the Offer, the Offerors will accept
for payment (and thereby purchase) up to all Interests tendered by
the Expiration Date. The proration period also expires on the
Expiration Date.
In the event that more than 3,500 Interests are tendered by
the Expiration Date (or such greater amount as allowed), the
Offerors will prorate purchases from the Limited Partners (unless
the Offerors determine to increase the number of Interests sought
in this Offer) as follows:
1. In the event of a proration, the Offerors will first
accept all of the tenders from Limited Partners who own fewer than
100 Interests and who tender all of their Interests by the
Expiration Date. If this amount is still exceeds the maximum
number of Interests to be purchased pursuant to the Offer, the
Offerors will prorate purchases based upon the ratio of (a) the
number of Interests tendered by each Limited Partner who own fewer
than 100 Interests and tendered all of their Interests to (b) the
total number of Interests tendered by all Limited Partners who own
fewer than 100 Interests and tender all of their Interests. The
General Partner will prorate such that every Limited Partner who
has prorated Interests will not hold Fractional Interests and will
not hold fewer than three (3) Interests, two (2) in the case of an
IRA.
2. If the above category of tendering Limited Partners has
been fully satisfied and if there are funds to purchase other
Interests tendered, the Partnership will do so. This second
category will consist of those (i) Limited Partners who own 100
Interests or more and (ii) Limited Partners who own fewer than 100
Interests and who tendered some, but not all of their Interests.
If necessary, the Partnership will prorate tenders based upon the
ratio of the number of Interests tendered by each Limited Partner
in this second category to the total number of Interests tendered
in this second category, provided that the Partnership may round
the prorated amount such that a Limited Partner who tenders
Interests does not hold any Fractional Interest and must hold at
least three (3) Interests, two (2) in the case of an IRA. If a
Limited Partner decides to tender some, but not all, Interests,
such Limited Partner must tender an amount such that the Limited
Partner does not hold Fractional Interests and holds at least three
(3) Interests, two (2) in the case of an IRA. See AThe
OfferCProcedure for Tendering Interests.
If the Offerors increase the price to be paid for Interests,
or the Offerors increase the number of Interests being bought and
any such increase in the number of Interests being bought exceeds
2% of the outstanding Interests, or the Offerors decrease the
number of Interests being bought, and the Offer is scheduled to
expire fewer than ten business days from and including the date
that notice of such increase or decrease is first published, sent
or given to Limited Partners, then the Offer will be extended for
ten business days from and including the date of such notice. For
purposes of the Offer, a Abusiness day means any day other than a
Saturday, Sunday or federal holiday and consists of the time period
from 12:01 A.M. through Midnight, Central Time. If the Offerors
obtain financing, it will prepare and disseminate supplemental
material and, if necessary, may extend the Expiration Date.
E. Procedures for Tendering Interests.
In order for a tendering Limited Partner to participate in
this Offer, Interests must be validly tendered on or prior to the
Expiration Date, and not withdrawn. A valid tender requires that a
properly completed and duly executed Letter of Acceptance and duly
executed signature pages for any other documents required by the
Letter of Acceptance be actually received by the Offerors on or
prior to the Expiration Date. A Limited Partner may tender all or
any portion of its Interests, including Fractional Interests,
provided the Limited Partner must tender any Fractional Interests
and may not hold fewer than three (3) Interests, two (2) in the
case of an IRA, after the tender. All Interests of the Partnership
have been issued in book entry form, which means that there are no
certificates for the Interests. The Offerors expect to forward
cash to the Limited Partners who tender Interests within 5 days of
the Expiration Date. It is a violation of Section 10(b) of the
Exchange Act and Rule 10b-4 promulgated thereunder, for a person to
tender Interests for such person's own account unless the person so
tendering owns such Interests. Section 10(b) and Rule 10b-4
provide a similar restriction applicable to the tender or guarantee
of a tender on behalf of another person. The acceptance of
Interests by the Offerors for payment will constitute a binding
agreement between the tendering Limited Partner and the Offerors
upon the terms and subject to the conditions of the Offer,
including the tendering Limited Partner's representation that (1)
such Limited Partner owns the Interests being tendered within the
meaning of Rule 10b-4 promulgated under the Exchange Act and (2)
the tender of such Interests complies with Rule 10b-4.
The Letter of Acceptance must be signed by the registered
holder of the Interests, exactly as the name appears on the
register of the Partnership, and payment will be made directly to
that holder at the address indicated on the register.
The method of delivery of the letter of acceptance and all
other required documents is solely at the option and risk of the
tendering Limited Partner, and delivery will be deemed made only
when actually received by the Offerors. Overnight courier service
or registered mail is recommended.
F. Signature Guarantees and Method of Delivery.
No signature guarantee is required on the Letter of Acceptance
if the Letter of Acceptance is signed by the registered holder of
the Interests tendered therewith and payment is to be made directly
to such registered holder, or if Interests are tendered for the
account of a member firm of a registered national securities
exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an
office, branch or agency in the United States (each such entity
being hereinafter referred to as an AEligible Institution). In all
other cases, all signatures on the Letter of Acceptance must be
guaranteed by an appropriate institution. See Instruction to the
Letter of Acceptance.
If payment is requested to be made to a person or persons
other than those in whose name or address the Interests stand on
the Partnership's books, the signature of the Interest owner or
owners on the Letter of Acceptance must be guaranteed by a federal
or state chartered bank or savings and loan institution or by a
broker-dealer that is a member of the New York Stock Exchange.
To prevent back-up federal income tax withholding equal to 31%
of the gross payments made pursuant to the Offer, each Limited
Partner who does not otherwise establish an exemption from such
withholding must notify the Offerors of such Limited Partner's
correct taxpayer identification number (or certify that such
taxpayer is awaiting a taxpayer identification number) and provide
certain other information by completing the Substitute Form W-9
included in the Letter of Acceptance. Certain Limited Partners,
including corporations, are not subject to the withholding and
reporting requirements. Foreign Limited Partners who are subject
to the different requests.
All questions as to the number of Interests to be accepted and
the validity, form, eligibility (including the time of receipt) and
acceptance for payment of any tender of Interests will be
determined by the Offerors, in its sole discretion, which
determination shall be final and binding on all parties. The
Offerors reserve the absolute right to reject any and all tenders
it determines not to be in proper form or the acceptance of payment
for which may, in the opinion of the Partnership's counsel, be
unlawful. The Offerors also reserve the absolute right to waive
any of the conditions of the Offer and any defect or irregularity
in the tender of any particular Interest. No tender of Interests
will be deemed to be properly made until all defects and
irregularities have been cured or waived. The Offerors are not and
will not be obligated to give notice of any defects or
irregularities in tenders, and will not incur any liability for
failure to give such notice.
7. WITHDRAWAL RIGHTS.
Tenders of Interests made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Additionally,
tenders may be withdrawn at any time within 7 days of your tender
pursuant to the requirements of Wisconsin law. Thereafter, such
tenders are irrevocable, except that they may be withdrawn after
September 13, 2003, unless theretofore accepted for payment as
provided in this Offer. If the Offerors extend the period of time
during which the Offer is open, is delayed in accepting for payment
or paying for Interests or is unable to accept for payment or pay
for Interests pursuant to the Offer for any reason, then, without
prejudice to the Offerors' rights under the Offer, the Offerors may
retain all Interests tendered, and such Interests may not be
withdrawn except as otherwise provided in this Section 7, subject
to Rule 14e-1(c) under the Exchange Act, which provides that the
person making the tender offer shall either pay the consideration
offered, or return the tendered securities promptly after the
termination or withdrawal of the tender offer. Pursuant to SEC
regulations, you may also withdraw your tendered Interests, if your
Interests have not been accepted for payment by the fortieth
business day after the commencement of the Offer.
To be effective, a written or facsimile transmission notice of
withdrawal must be timely received by the Offerors at their address
set forth in the Letter of Acceptance and must specify the name of
the person who tendered the Interests to be withdrawn and the
number of Interests to be withdrawn. Withdrawals may not be
rescinded, and Interests withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn
Interests may be retendered by again following the procedures
described in AThe OfferCProcedures for Tendering Interests at any
time prior to the Expiration Date.
All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by the
Offerors, in their sole discretion, which determination shall be
final and binding. Neither of the Offerors nor any other person
will be under any duty to give notification of any defect or
irregularity in any notice of withdrawal or incur any liability for
failure to give any such notification.
8. PAYMENT OF PURCHASE PRICE.
On the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and
conditions of any extension or amendment), the Offerors will accept
for payment, and will pay for, Interests validly tendered and not
withdrawn in accordance with the Offer, as promptly as practicable
following the Expiration Date. Limited Partners can expect to
receive payment within one or two days of the Expiration Date. In
all cases, payment for Interests purchased pursuant to the Offer
will be made only after timely receipt by the Offerors of a
properly completed and duly executed Letter of Acceptance and any
other documents required by the Letter of Acceptance.
For purposes of the Offer, Mr. Keierleber shall be deemed to
have accepted for payment (and thereby purchased) tendered
Interests when, as and if the Offerors give oral or written notice
to the Partnership of Mr. Keierleber's acceptance for payment of
such Interests by Mr. Keierleber pursuant to the Offer. On the
terms and subject to the conditions of the Offer, payment for
Interests purchased pursuant to the Offer will in all cases be made
by his deposit of the $910.00 Purchase Price with the Partnership,
which will act as agent for the tendering Limited Partners for the
purpose of receiving payment from the Offerors and transmitting
payment to tendering Limited Partners. Under no circumstances will
interest be paid on the Purchase Price by reason of any delay in
making such payment.
If any tendered Interests are not accepted for payment
pursuant to the terms and conditions of the Offer, the Letter of
Acceptance with respect to such Interests not purchased will be
destroyed by the Offerors. If, for any reason whatsoever,
acceptance for payment of, or payment for, any Interests tendered
pursuant to the Offer is delayed or the Offerors are unable to
accept for payment, purchase or pay for Interests tendered pursuant
to the Offer, then, without prejudice to the Offerors' rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the
Exchange Act), the Offerors may retain tendered Interests, subject
to any limitations of applicable law, and such Interests may not be
withdrawn, except to the extent that the tendering Limited Partners
are entitled to withdrawal rights as described in the Offer.
If, prior to the Expiration Date, the Offerors increase the
Purchase Price offered to Limited Partners pursuant to the Offer,
the Offerors will pay the increased Purchase Price for all
Interests accepted for payment pursuant to the Offer, whether or
not such Interests were tendered prior to the increase.
The Offerors reserve the right to transfer or assign, at any
time and from time to time, in whole or in part, to one or more
affiliates, the right to purchase Interests tendered pursuant to
the Offer, but no such transfer or assignment will relieve the
Offerors of their obligations under the Offer or prejudice the
rights of tendering Limited Partners to receive payments for
Interests validly tendered and accepted for payment pursuant to the
Offer.
9. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the
Offerors will not be required to accept for payment or pay for any
Interests tendered, and may terminate or amend the Offer or may
postpone (subject to the requirements of the Exchange Act for
prompt payment for or return of Interests) the acceptance for
payment or payment for Interests tendered, if at the Expiration
Date, as it may be extended, any of the following events shall have
occurred (or shall have been determined by the Offerors in their
reasonable judgment to have occurred) regardless of the
circumstances giving rise thereto (including any action or omission
to act by the Offerors):
(a) there shall have been threatened, instituted or pending
any action or proceeding by any government or governmental,
regulatory or administrative agency or authority or tribunal or any
other person, domestic or foreign, or before any court, authority,
agency or tribunal that (i) challenges or seeks to challenge the
acquisition of Interests pursuant to the Offer or otherwise in any
manner relates to or affects the Offer or (ii) in the reasonable
judgment of the Offerors, could materially and adversely affect the
business, condition (financial or other), income, operations or
prospects of the Partnership, or otherwise materially impair in any
way the contemplated future conduct of the business of the
Partnership or materially impair the contemplated benefits of the
Offer to the Offerors;
(b) there shall have been any action threatened, pending or
taken, or approval withheld, withdrawn or abrogated or any statute,
rule, regulation, judgment, order or injunction threatened,
proposed, sought, promulgated, enacted, entered, amended, enforced
or deemed to be applicable to the Offer or the Partnership, by any
legislative body, court, authority, agency or tribunal which would
or might directly or indirectly (i) make the acceptance for payment
of, or payment for, some or all of the Interests illegal or
otherwise restrict or prohibit consummation of the Offer, (ii)
delay or restrict the ability of the Offerors, or render the
Offerors unable, to accept for payment or pay for some or all of
the Interests, (iii) impose or seek to impose limitations on the
ability of the Offerors to acquire or hold or exercise full rights
of ownership of the Interests, (iv) materially impair the
contemplated benefits of the Offer to the Offerors or (v)
materially affect the business, condition (financial or other),
income, operations or prospects of the Partnership, or otherwise
materially impair in any way the contemplated future conduct of the
business of the Partnership;
(c) except for Mr. Keierleber and his affiliates, it shall
have been publicly disclosed or the Offerors shall have learned
that any person or Agroup (within the meaning of Section 13(d)(3)
of the Exchange Act) has acquired or proposes to acquire beneficial
ownership of more than 5% of the outstanding Interests;
(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, (ii) any
significant decline in the general level of market prices of equity
securities in the United States or abroad, (iii) any change in the
general political, market, economic or financial condition in the
United States or abroad that could have a material adverse effect
on the Partnership's business, condition (financial or other),
income, operations or prospects, (iv) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States or any limitation on, or any event which, in the
Offerors' reasonable judgment, might affect, the extension of
credit by lending institutions in the United States, (v) the
commencement of a war, armed hostilities or other international or
national crisis directly or indirectly involving the United States
or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Offer, in the Offerors' reasonable
judgment, a material acceleration or worsening thereof; or
(e) there shall have occurred any decline in the S&P
Composite 500 Stock Index by an amount in excess of 15% measured
from the close of business on July 15, 2003; and, in the reasonable
judgment of the Offerors, such event or events make it undesirable
or inadvisable to proceed with the Offer or with such acceptance
for payment.
Any of the foregoing conditions may be waived by the Offerors,
in whole or in part, at any time and from time to time in its
reasonable discretion. The failure by the Offerors at any time to
exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any
determination by the Offerors concerning the events described above
will be final and binding on all parties.
10. PRICE RANGE OF INTERESTS; DISTRIBUTIONS; TRADING VOLUME.
The Interests are not listed on any national securities
exchange or quoted in the over-the-counter market, and there is no
established public trading market for the Interests. Secondary
sales activity for the Interests has been extremely limited and
sporadic. The Partnership monitors transfers of the Interests
because the admission of the transferee as a substitute limited
partner requires the consent of the General Partner under the
Partnership Agreement. However, neither the Partnership nor Mr.
Keierleber has information regarding the prices at which all
secondary sales transactions in the Interests have been
effectuated. Various organizations offer and sell limited
partnership interests (such as the Interests) in secondary sales
transactions. Various publications such as The Partnership
Spectrum summarize and report information (on a monthly, bimonthly
or less frequent basis) regarding secondary sales transactions in
limited partnership interests (including the Interests), including
the prices at which such secondary sales transactions are
effectuated.
The Offerors have been informed that the Partnership
estimates, based solely on the transfer records of the Partnership,
that the number of Interests transferred in sales transactions
(i.e., excluding transactions believed to be between related
parties, family members or the same beneficial owner) has been as
set forth in Appendix B.
The Offerors are not aware of the prices paid in these
transactions except as set forth in Appendix B hereto.
The Partnership has paid distributions with respect to the
Interests as described below. No public offering of Interests has
been made since 1987 by the Offerors.
During the last two years, quarterly cash distributions to
Limited Partners were declared at the rate of 5% per annum on the
original capital investment of $1,000.00 per Interest through the
second quarter of 2002. Quarterly cash distributions were
suspended during the third quarter of 2002, and have not been
resumed. Cash distributions declared to the Limited Partners for
the two year period ended June 30, 2003 were made as follows:
Amount Distributed
Period Ended
Date Paid
Total
Per Interest
June 30, 2001
July 20, 2001
$167,466.00
$12.50
September 30,
2001
October 18, 2001
$167,466.00
$12.50
December 31,
2001
January 18, 2002
$167,466.00
$12.50
March 31, 2002
April 18, 2002
$167,770.00
$12.50
June 30, 2002
July 19, 2002
$128,269.00
$12.50
September 30,
2002
N/A
$0.00
$0.00
December 31,
2002
N/A
$0.00
$0.00
March 31, 2003
N/A
$0.00
$0.00
June 30, 2003
N/A
$0.00
$0.00
It is not anticipated that cash distributions will be resumed
during 2003.
The Partnership Agreement provides that the Partnership will
make quarterly distributions to all partners of Cash Available for
Distribution as defined in the Partnership Agreement whereby 99% of
all distributable cash, as defined in the Partnership Agreement,
will be distributed to the Limited Partners and 1% to the General
Partner. The cash actually distributed by the Partnership has
exceeded this requirement.
The actual amount and frequency of future cash distributions
will depend upon future cash flows generated by operations, capital
requirements, debt service requirements, financial condition, and
working capital requirements.
11. CERTAIN INFORMATION CONCERNING THE OFFERORS.
Mr. Jeffrey Keierleber (age 50) is a licensed real estate
broker and securities agent and manages real estate. He is the
sole Director of the corporate general partner for various limited
partnerships and serves as a co-general partner in the public
limited partnerships sponsored by affiliates of Decade Companies,
and he is a general partner in all of the non-public limited
partnerships sponsored by affiliates of Decade Companies. Mr.
Keierleber is a shareholder, officer, and director of a number of
privately held and affiliated corporations, often with a focus in
real estate or related services. Mr. Keierleber's business address
and telephone number are: N19 W24130 Riverwood Dr., Suite 100,
Waukesha, Wisconsin 53188, (262) 522-8990. Mr. Keierleber is a
citizen of the United States. See AThe
OfferCIntroductionCBackground and AThe OfferCIntroductionCInterests
of Certain Persons in the Offer for additional information
regarding Mr. Keierleber.
Decade Companies Income PropertiesCA Limited Partnership (the
APartnership) is a limited partnership formed in 1985 under the
Uniform Limited Partnership Act of the State of Wisconsin. The
address and telephone number of the Partnership are: N19 W24130
Riverwood Dr., Suite 100, Waukesha, Wisconsin 53188, (262) 522-
8990. Since December 1986, the Partnership has been engaged in the
business of investing in, operating and making loans on residential
apartment projects and office buildings. For more information
about the business of the Partnership, see AThe OfferC
Introduction.
The Partnership's General Partner is Decade CompaniesCA
General Partnership (ADecade Companies) (of which Mr. Keierleber
and Decade 80, Inc. (ADecade 80) are the current general partners).
The principal offices of Decade Companies is at N19 W24130
Riverwood Dr., Suite 100, Waukesha, Wisconsin 53188, telephone
(262) 522-8990. Decade Companies is engaged in the business of
serving as a general partner. Decade 80 is a corporation organized
under the laws of the State of Wisconsin. Mr. Keierleber is the
sole shareholder of Decade 80. Decade 80 is engaged in the
business of serving as a general partner.
During the past five years, the Offerors, Decade Companies,
Decade 80, Michael G. Sweet and Steven Cooper have not been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors), nor have any of them been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such
laws.
12. SOURCE AND AMOUNT OF FUNDS.
A. Source of Funds.
Assuming that the Offerors purchase 3,500 Interests pursuant
to the Offer at the Purchase Price, the total amount required by
the Offerors to purchase such Interests will be approximately
$3,185,000, exclusive of fees and other expenses.
The amount of funds required for the Partnership to purchase
100 Interests pursuant to the Offer at the Purchase Price of
$910.00 per Interest is $91,000. In addition, the Partnership will
pay all fees and expenses of the Offer, estimated to be up to
$63,000.
In the event that more than 100 Interests are tendered by the
Expiration Date, Jeffrey Keierleber, will purchase up to 3,400
Interests (approximately 33.1% of the remaining 10,261.510
outstanding Interests) at the Purchase Price of $910.00 per
Interest using his available personal funds. The amount of funds
required to purchase 3,400 Interests is $3,094,000. To the extent
that Jeffrey Keierleber purchases Interests, a Limited Partner's
retained Interests will not receive a proportionate increase in
their percentage share of profits, losses, and distributions.
In the event that more than 3,500 Interests are tendered by
the Expiration Date, the Offerors will determine whether to
increase the number of Interests to be purchased in this Offer, in
order to accommodate all Limited Partners who desire to tender
their Interests in this Offer.
Repurchase of additional Interests by the Partnership, if any,
would need to be funded by Partnership borrowing. The Partnership
will evaluate its ability to borrow additional funds on terms
deemed acceptable by the General Partner to enable the Partnership
to purchase additional Interests.
B. Conditions.
There are no material conditions to the proposed loan of
$154,000 to the Partnership from an affiliate of the General
Partner.
C. Expenses.
The expenses incurred, or estimated to be incurred, in
connection with the Offer are set forth below. The Partnership
will be responsible for paying all such expenses.
Printing and Mailing Fees....................... $
7,000
Filing Fees and Expenses........................
4,000
Legal and Accounting.............................
30,000
Administrative Costs...............................
12,000
Valuation and Fairness Opinion.............. 10,000
---------
Total........................................
$ 63,000
'====
D. Borrowed Funds.
The Partnership will borrow all of the funds from an affiliate
required for the purpose of completing its purchase of 100
Interests pursuant to the Offer at the Purchase Price of $910.00
per Interest ($91,000) and to pay all fees and expenses of the
Offer, estimated to be up to $63,000.
The Partnership has sought and received an unwritten, but
binding, commitment for financing from an affiliate of the General
Partners. A Form of the Demand Promissory Note in the amount of
$154,000 is attached herewith as Appendix C. The $154,000 loan
will be due and payable upon demand. The loan will be unsecured.
The stated and effective fixed interest rate will be set on the
date of the loan at two percentage points over the prime lending
rate published in the Wall Street Journal. The current prime rate
is 4.25% per annum, which would result in a loan rate of 6.25% per
annum. There are no other material terms or conditions of the
loan.
The Partnership plans to repay the loan from cash generated by
future operations.
The Partnership has not sought or received any other
commitment for financing the purchase of additional Interests in
excess of the 100 Interests that it seeks in this Offer, and there
can be no assurance that such financing could be arranged on terms
deemed satisfactory to the Partnership. The actual amount of any
funds borrowed would depend upon the results of this Offer, the
interest rate of the borrowing, the term of the loan, loan
amortization, and costs incurred to obtain such loan. There can be
no assurances that the Partnership could obtain such financing on
acceptable terms.
13. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS; TRANSACTIONS
AND AGREEMENTS CONCERNING THE INTERESTS.
Except as disclosed in the audited financial statements and
permitted by the Partnership Agreement, Mr. Keierleber has not been
a party to any contract, transaction or negotiation since April 1,
2001 with the Partnership where the aggregate amount of such
transaction was more than $60,000. As is disclosed on the
Partnership's most recent annual report filed with the SEC, the
Partnership is a party to a Management Consulting Agreement and a
Property management Agreement with the General Partner and
affiliates of Mr. Keierleber. Except as disclosed herein in
connection with the Offer, Mr. Keierleber has not been a party to
any contacts, negotiations or transactions with the Partnership
concerning a merger, consolidation or acquisition of the
Partnership, a tender offer or acquisition of securities of the
Partnership, an election of a new general partner of the
Partnership, or a sale or other transfer of a material amount of
assets of the Partnership.
Additionally, except with respect to the Partnership
Agreement, the Offerors are not a party to any contract,
arrangement, understanding or relationship, directly or indirectly,
with any other person with respect to any securities of the
Partnership, has not been a party to any contract, transaction or
negotiation with any person with respect to the Interests,
including any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any Interests, joint
ventures, loan or option arrangements, puts or calls, guaranties of
loans, guaranties of loans, guaranties against loss or the giving
or withholding of proxies, consents or authorizations and is not
aware of any contacts or negotiations between the Partnership and
any of its affiliates, or between the Partnership (including its
affiliates) and any person not affiliated with the Partnership
concerning a merger, consolidation or acquisition of the
Partnership; a tender offer or acquisition of securities of the
Partnership, an election of a new general partner of the
Partnership, or a sale or other transfer of a material amount of
assets of the Partnership.
Appendix B hereto sets forth the number of Interests purchased
by Mr. Keierleber and the Partnership since January 1, 2001, the
range of prices paid for such Interests and the average purchase
price paid for each quarterly period since January 1, 2001. Exhibit
B also sets forth the transactions occurring in the past 60 days
involving the sale or purchase of any Interests by Mr. Keierleber,
the Partnership or their affiliates. The Partnership has waived its
right under the Partnership Agreement to purchase any Interests
purchased by Mr. Keierleber.
14. OWNERSHIP OF INTERESTS.
Jeffrey L. Keierleber currently beneficially owns 6,694.317
Interests, representing approximately 65% of the total outstanding
Interests as of July 15, 2003. Except as disclosed in this Offer
including Appendix B, neither the Partnership, Mr. Keierleber nor
any person affiliated with either the Partnership or Mr. Keierleber
has engaged in any transactions with respect to the Interests
within the 60 days immediately preceding the date of the Offer.
As of July 15, 2003, the following individuals beneficially
owned the following number of outstanding Interests:
Owner
Number of
Interests
% of Total Outstanding
Interests
Mr. Jeffrey L.
Keierleber
6,694.317
65.237%
Mr. Michael G. Sweet
8.050
0.001%
Mr. Steven Cooper
0.000
0.000%
Decade Companies
0.000
0.000%
Decade 80
0.000
0.000%
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Offerors expressly reserve the right, in their sole
discretion and at any time or from time to time, to extend the
period of time during which the Offer is open by giving oral or
written notice of such extension to the Limited Partners. There
can be no assurance, however, that the Offerors will exercise their
right to extend the Offer. During any such extension, all
Interests previously tendered will remain subject to the Offer,
except to the extent that such Interests may be withdrawn as set
forth herein. The Offerors also expressly reserve the right, in
their sole discretion, (i) to terminate the Offer and not accept
for payment any Interests not theretofore accepted for payment or,
subject to Rule 14e-1(c) under the Exchange Act, which requires the
Offerors either to pay the consideration offered or to return the
Interests tendered promptly after the termination or withdrawal of
the Offer, to postpone payment for Interests upon the occurrence of
any of the conditions specified in Section 9 AThe OfferBCertain
Conditions of the Offer hereof by giving oral or written notice of
such termination to the Partnership and Limited Partners and making
a public announcement thereof and (ii) at any time or from time to
time, to amend the Offer in any respect. Amendments to the Offer
may be effected by public announcement. Without limiting the
manner in which the Offerors may choose to make public announcement
of any termination or amendment, the Offerors shall have no
obligation (except as otherwise required by applicable law) to
publish, advertise or otherwise communicate any such public
announcement, other than by making a release to the Dow Jones News
Service, except in the case of an announcement of an extension of
the Offer, in which case the Offerors shall have no obligation to
publish, advertise or otherwise communicate such announcement other
than by issuing a notice of such extension by press release or
other public announcement, which notice shall be issued no later
than 9:00 a.m., Central Time, on the next business day after the
previously scheduled Expiration Date. Material changes to
information previously provided to Limited Partners in this Offer
or in documents furnished subsequent thereto will be disseminated
to Limited Partners in compliance with Rule 14d-6(d) promulgated
under the Exchange Act.
If the Offerors materially change the terms of the Offer or
the information concerning the Offer, or if they waive a material
condition of the Offer, the Offerors will extend the Offer to the
extent required by Rules 14d-6(d) and Rule 14e-1(a) under the
Exchange Act. Those rules require that the minimum period during
which an offer must remain open following material changes in the
terms of the Offer or information concerning the Offer (other than
a change in price, change in dealer's soliciting fee or change in
percentage of securities sought) will depend on the facts and
circumstances, including the relative materiality of such terms or
information. In a published release, the Commission has stated
that in its view, an offer should remain open for a minimum of five
business days from the date that notice of such a material change
is first published, sent or given. The Offer will continue or be
extended for at least ten business days from the time the Offerors
publish, send or give to holders of Interests a notice that it will
(a) increase or decrease the price it will pay for Interests or (b)
decrease the number of Interests it seeks.
16. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
A. Solicitations or Recommendations. In connection
with the Offer, the Partnership will utilize the
services of Michael Sweet, the Partnership Manager,
and certain other secretarial, clerical, and
accounting employees of the General Partner, Decade
Companies, or its affiliates. All of such persons
will receive compensation from the General Partner,
or its affiliates, in connection with their
services rendered to the Partnership in connection
with the Offer. The actual cost of such
compensation includes wages, and estimates of the
costs of health care expenses, payroll taxes,
unemployment taxes, worker's compensation
insurance, 401(k) profit sharing plans, and other
fringe benefits and overhead items. The General
Partner and/or its affiliates will be reimbursed by
the Partnership for the time devoted by such
persons, at the actual cost. No such person is
authorized to make a recommendation to any Limited
Partner as to whether to tender or refrain from
tendering Interests.
The Partnership has not directly or indirectly
employed, retained, or compensated any broker,
dealer, commercial bank, trust company or any other
unaffiliated person to make solicitations or
recommendations in connection with the Offer. No
such broker, dealer, commercial bank, trust
company, or any other unaffiliated person has been
authorized to act as the Partnership's agent for
purposes of this Offer.
B. Employees and Partnership Assets.
The Partnership does not directly employ any
individuals. In order to effectively manage the
personnel function of managing the Partnership and
operating its real estate investments, and to
control the costs of compensation, the persons who
work for the Partnership (and its real estate
investments) are employed by the General Partner or
its affiliates.
All expenses incurred in connection with the Offer,
will be billed directly to the Partnership to the
extent practicable and paid by the Partnership.
Such expenses include legal fees, accounting fees,
printing costs, and computer services. In
addition, the Partnership will reimburse the
General Partner for the actual costs incurred by
the General Partner in connection with the Offer
including goods, materials, communications
expenses, computer expenses, customary handling and
mailing expenses, and other related operational and
administrative expenses incurred in connection with
the Offer. Excluded from the allowable
reimbursement shall be (i) rent or depreciation,
utilities, capital equipment, or other
administrative items; and (ii) salaries, fringe
benefits, travel expenses and other administrative
items incurred or allocated to Mr. Keierleber, the
controlling person of the General Partner.
Mr. Keierleber will use funds from existing cash to
repurchase Interests. The Partnership will borrow
all of the Funds required for the purpose of
completing its purchase of 100 Interests pursuant
to the Offer.
17. MISCELLANEOUS.
The Partnership is subject to the informational requirements
of the Exchange Act and in accordance therewith files reports and
other information with the Commission relating to its business,
financial condition and other matters. The Partnership and Mr.
Keierleber have independently filed a Rule 13e-3 Transaction
Statement and a Tender Offer Statement on Schedule TO with the
Commission, which includes certain additional information relating
to the Offer. Such reports, as well as such other material, may be
inspected and copies may be obtained at the Commission's Public
Reference Section at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at the regional offices of the Commission
located at 233 Broadway, New York, New York 10279, and 175 W.
Jackson Blvd., Suite 900, Chicago, Illinois 60604. Copies of such
material may be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's Public Reference Section at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other materials that
are filed through the Commission's Electronic Data Gathering,
Analysis, and Retrieval system. This Web site can be accessed at
http://www.sec.gov. The Offeror's Schedule TO may not be available
at the Commission's regional offices.
The Offer is being made to all Limited Partners. The Offerors
are not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to a valid
state statute. If the Offerors become aware of any valid state
statute prohibiting the making of the Offer, the Offerors will make
a good faith effort to comply with such statute. If, after such
good faith effort, the Offerors cannot comply with such statute,
the Offer will not be made to, nor will tenders be accepted from or
on behalf of, holders of Interests in such state.
July 15, 2003
/s/ JEFFREY L. KEIERLEBER
JEFFREY L. KEIERLEBER
DECADE COMPANIES INCOME PROPERTIES
Appendix A
INDEX TO PRO FORMA FINANCIAL INFORMATION
Annex
Pro forma balance sheet as of December 31, 2002 (unaudited). . . . . . .A-1
Pro forma balance sheet as of March 31, 2003 (unaudited) . . . . . . . .A-2
Pro forma statement of income, earnings per Interest, and ratio of
earnings to
fixed charges for the year ended December 31, 2002 (unaudited)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-3
Pro forma statement of income, earnings per Interest, and ratio of
earnings to
fixed charges for the three months ended March 31, 2003
(unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Pro forma book value per Interest as of December 31, 2002
(unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
Annex A-1
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Pro Forma Condensed Balance Sheet
December 31, 2002
(Unaudited)
The foregoing unaudited Pro Forma Condensed Balance Sheet gives
effect to certain assumptions, including the purchase of 100
Interests at $910.00 per Interest pursuant to the Offer, financed
by a new unsecured demand loan from an affiliate in the amount of
$154,000 . The Pro Forma Condensed Balance Sheet gives effect to
the transaction as if it had occurred on December 31, 2002.
The pro forma information should be read in conjunction with the
historical financial information for the Partnership, but does not
purport to be indicative of the results which may be obtained in
the future or which would actually have been obtained had the Offer
occurred as of December 31, 2002. The pro forma presentation shows
the possible scope of the change in the historical financial
position caused by the transaction.
PRO FORMA ADJUSTMENTS
Historical
Purchase
of
Interests
Pro Forma
Assets
Net book value of rental
property
$24,754,870
0
$24,754,870
Current assets
258,709
0
258,709
Investment in unconsolidated
affiliate
4,342,642
0
4,342,642
Other assets
618,567
0
618,567
Total Assets
$29,974,788
0
$29,974,788
Liabilities and Partners'
Capital
Current Liabilities
Demand note payable
to affiliate
$0
$154,000
$ 154,000
Other current
liabilities
1,501,331
0
1,501,331
Total current
liabilities
1,501,331
154,000
1,655,331
Long-term liabilities
Payables to
affiliates
1,422,224
0
1,422,224
Mortgage notes
payable
26,506,247
0
26,506,247
Total long-term
liabilities
27,928,471
0
27,928,471
Total liabilities
29,429,802
0
29,583,802
Partners' Capital
General Partner
(21,271)
(21,271)
Limited Partners
566,257
(154,000)
412,257
Total Partners'
Capital
544,986
(154,000)
390,986
Total Liabilities and
Partners' Capital
$29,974,788
0
$29,974,788
See notes to Pro Forma Condensed Balance Sheet
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Notes to Pro Forma Condensed Balance Sheet
December 31, 2002
(Unaudited)
The following notes describe the assumptions underlying the Pro
Forma Condensed Balance Sheet.
The unaudited Pro Forma Condensed Balance Sheet was prepared to
illustrate the estimated effects of the Offer as if the transaction
had occurred on December 31, 2002.
The unaudited Pro Forma Condensed Balance Sheet does not purport to
represent what the Partnership's financial position would actually
have been if the Offer in fact had occurred at December 31, 2002,
nor does it purport to project the Partnership's financial position
for any future date.
The unaudited Pro Forma Condensed Balance Sheet should be read in
conjunction with the audited financial statements as of December
31, 2002 and for the year then ended and the related notes thereto
included in our 2002 annual report on Form 10-KSB.
A. The historical Balance Sheet is based on the audited balance
sheet as of December 31, 2002.
B. Adjustments to the Pro Forma Condensed Balance Sheet give
effect to certain assumptions, including: (a) the purchase by
the Partnership of 100 Interests at the Offer Price of $910.00
per Interest pursuant to the Offer; and (b) an unsecured
demand loan from an affiliate in the amount of $154,000.
Under these assumptions, the aggregate redemption would amount
to $91,000. It is assumed that the cost of the Offer will be
$63,000. The Pro Forma Balance Sheet gives effect to the
transaction as if it had occurred on the balance sheet date.
C. The actual financial position which would have been achieved
during the pro forma period had the transaction occurred on
the assumed date may have varied from the Pro Forma Financial
Statements, and the variations may have been material.
Annex A-2
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Pro Forma Condensed Balance Sheet
March 31, 2003
(Unaudited)
The foregoing unaudited Pro Forma Condensed Balance Sheet gives
effect to certain assumptions, including the purchase of 100
Interests at $910.00 per Interest pursuant to the Offer, financed
by a new loan in the amount of $154,000 . The Pro Forma Condensed
Balance Sheet gives effect to the transaction as if it had occurred
on March 31, 2003.
The pro forma information should be read in conjunction with the
historical financial information for the Partnership, but does not
purport to be indicative of the results which may be obtained in
the future or which would actually have been obtained had the Offer
occurred as of March 31, 2003. The pro forma presentation shows
the possible scope of the change in the historical financial
position caused by the transaction.
PRO FORMA ADJUSTMENTS
Historical
Purchase
of
Interests
Pro Forma
Assets
Net book value of rental
property
$24,529,234
0
$24,529,234
Current assets
189,347
0
189,347
Investment in unconsolidated
affiliate
4,366,106
0
4,366,106
Other assets
589,023
0
589,023
Total Assets
29,673,710
0
$29,673,710
Liabilities and Partners'
Capital
Current Liabilities
Demand note payable
to affiliate
$0
$154,000
$ 154,000
Other current
liabilities
1,458,403
0
1,458,403
Total current
liabilities
1,458,403
154,000
1,612,403
Long-term liabilities
Payables to
affiliates
1,432,698
0
1,432,698
Mortgage notes
payable
26,282,484
0
26,282,484
Total long-term
liabilities
27,715,182
0
27,715,182
Total liabilities
29,173,585
154,000
29,327,585
Partners' Capital
General Partner
(21,720)
0
(21,720)
Limited Partners
521,845
(154,000)
367,845
Total Partners'
Capital
500,125
(154,000)
346,125
Total Liabilities and
Partners' Capital
$29,673,710
0
$29,673,710
See notes to Pro Forma Condensed Balance Sheet
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Notes to Pro Forma Condensed Balance Sheet
March 31, 2003
(Unaudited)
The following notes describe the assumptions underlying the Pro
Forma Condensed Balance Sheet.
The unaudited Pro Forma Condensed Balance Sheet was prepared to
illustrate the estimated effects of the Offer as if the transaction
had occurred on March 31, 2003.
The unaudited Pro Forma Condensed Balance Sheet does not purport to
represent what the Partnership's financial position would actually
have been if the Offer in fact had occurred at March 31, 2003, nor
does it purport to project the Partnership's financial position for
any future date.
The unaudited Pro Forma Condensed Balance Sheet should be read in
conjunction with the unaudited financial statements as of March 31,
2003 and for the three month period then ended and the related
notes thereto included in our March 31, 2003 quarterly report on
Form 10-QSB.
A. The historical Balance Sheet is based on the unaudited balance
sheet as of March 31, 2003.
B. Adjustments to the Pro Forma Condensed Balance Sheet give
effect to certain assumptions, including: (a) the purchase by
the Partnership of 100 Interests at the Offer Price of $910.00
per Interest pursuant to the Offer; and (b) an unsecured
demand loan from an affiliate in the amount of $154,000.
Under these assumptions, the aggregate redemption would amount
to $91,000. It is assumed that the cost of the Offer will be
$63,000. The Pro Forma Balance Sheet gives effect to the
transaction as if it had occurred on the balance sheet date.
C. The actual financial position which would have been achieved
during the pro forma period had the transaction occurred on
the assumed date may have varied from the Pro Forma Financial
Statements, and the variations may have been material.
Annex A-3
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Pro Forma Condensed Statements of Operations, Earnings Per
Interest, and Ratio of Earnings to Fixed Charges
For The Year Ended December 31, 2002
(Unaudited)
The following unaudited Pro Forma Condensed Statements of
Operations, Earnings per Interest, and Ratio of Earnings to Fixed
Charges give effect to certain assumptions, including the purchase
by the Partnership of 100 Interests tendered by the Limited
Partners at the Offer Price of $910.00 per Interest, pursuant to
the Offer, financed by a new unsecured demand loan from an
affiliate in the amount of $154,000. The Pro Forma Condensed
Statements of Operations, Earnings per Interest, and Ratio of
Earnings to Fixed Charges give effect to the transaction as if it
had occurred at the beginning of the period presented (January 1,
2002).
The pro forma information should be read in conjunction with the
historical financial information for the Partnership, but does not
purport to be indicative of the results which may be obtained in
the future or which would actually have been obtained had the Offer
occurred as of January 1, 2002. The pro forma presentation shows
possible scope of the change in the historical results of
operations caused by the transaction.
PRO FORMA
HISTORIC
AL
ADJUSTMENT
S
PRO
FORMA
Operating Revenue
$5,283,611
0
$5,283,611
Operating Expenses (excluding
interest)
(4,045,015)
0
(4,045,0
15)
Net income from investment
property
1,238,596
0
1,238,596
Interest income
25,746
0
25,746
Administrative expenses
(352,857)
0
(352,
857)
Equity in earnings of
unconsolidated affiliate
120,606
0
120,606
Net income before interest
expense
1,032,091
0
1,032,091
Interest expense and debt
amortization
(1,953,445)
(9,625)
(1,963,0
70)
Net income (loss) from
continuing operations
(921,354)
(9,625)
(930,
979)
Discontinued Operations, net
8,360,385
0
8,360,385
Net Income
$7,439,031
$(9,625)
$7,429,406
PRO FORMA EARNINGS PER INTEREST
Net income attributable to the
Limited Partners (99%)
$7,364,641
$(9,529)
$7,355,112
Net income (loss) per Limited
Partner
Interest
$ 648.10
$ 653.01
Weighted Average Interests
Outstanding
11,363.48
(100)
11,263.48
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
Earnings (loss) before interest
expenses
$1,032,091
0
$1,032,091
Fixed charges
$1,953,445
9,625
$1,963,070
Ratio of earnings to fixed
charges
$0.53
$0.53
The above ratio (fixed charge ratio) compares earnings before
interest expense to interest expense. It indicates how many times
interest charges have been earned by the Partnership.
See Notes to Pro Forma Condensed Statements of Operations, Earnings
per Interest, and Ratio of Earnings to Fixed Charges.
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Notes to Pro Forma Condensed Statements of Operations, Earnings
Per Interest, and Ratio of Earnings to Fixed Charges
For the Year ended December 31, 2002 (unaudited)
The following notes describe the assumptions underlying the Pro
Forma Condensed Statements of Operations, Earnings per Interest,
and Ratio of Earnings to Fixed Charges. The unaudited Pro Forma
Condensed Statements of Operations, Earnings Per Interest, and
Ratio of Earnings to Fixed Charges should be read in conjunction
with the audited financial statements as of December 31, 2002 and
for the year ended and the related notes thereto included in our
2002 annual report on Form 10-KSB.
The pro forma financial information provided herein was prepared to
provide Limited Partners with information about the continuing
impact of the Partnership's Offer by showing how the transaction
might have affected historical financial statements if the
transaction had been consummated at an earlier time. The pro forma
statements are intended to assist Limited Partners in analyzing the
future prospects of the Partnership because they illustrate the
possible scope of the change in the Partnership's historical
financial position and results of operations caused by the Offer.
The unaudited Pro Forma Condensed Statements of Operations,
Earnings Per Interest and Ratio of Earnings to Fixed Charges were
prepared to illustrate the estimated effects of the Offer as if the
transaction had occurred on January 1, 2002.
The unaudited Pro Forma Condensed Statements of Operations,
Earnings Per Interest and Ratio of Earnings to Fixed Charges do not
purport to represent what the Partnership's results of operations,
earnings per Interest, or ratio of earnings to fixed charges, would
actually have been if the Offer in fact had occurred on January 1,
2002, or to project the Partnership's results of operations for any
period.
A. The historical Condensed Statement of Operations is based on
the audited financial statements as of and for the year ended
December 31, 2002.
B. Adjustments to the Pro Forma Condensed Statements of
Operations, Earnings Per Interest, and Ratio of Earnings to
Fixed Charges give effect to certain assumptions, including:
(a) the purchase by the Partnership of 100 Interests at the
Offer Price of $910.00 per Interest pursuant to the Offer; and
(b) an unsecured demand loan of $154,000 from an affiliate
bearing interest at 6.25% per annum. Under these assumptions,
the aggregate redemption would amount to $91,000 and the
annual interest expense in the new demand loan would be
$9,625. The Pro Forma Condensed Statements of Operations,
Earnings Per Interest, and Ratio of Earnings to Fixed Charges
give effect to the transaction as if it had occurred at the
beginning of the period presented (January 1, 2002).
C. The actual results which would have been achieved during the
pro forma period had the transactions occurred on the assumed
date may have varied from the Pro Forma Financial Statements,
and the variations may have been material.
Annex A-4
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Pro Forma Condensed Statements of Operations, Earnings Per
Interest, and Ratio of Earnings to Fixed Charges
For The Quarter Ended March 31, 2003
(Unaudited)
The following unaudited Pro Forma Condensed Statements of
Operations, Earnings per Interest, and Ratio of Earnings to Fixed
Charges give effect to certain assumptions, including the purchase
by the Partnership of 100 Interests tendered by the Limited
Partners at the Offer Price of $910.00 per Interest, pursuant to
the Offer, financed by a new unsecured demand loan from an
affiliate in the amount of $154,000. The Pro Forma Condensed
Statements of Operations, Earnings per Interest, and Ratio of
Earnings to Fixed Charges give effect to the transaction as if it
had occurred at the beginning of the period presented (January 1,
2003).
The pro forma information should be read in conjunction with the
historical financial information for the Partnership, but does not
purport to be indicative of the results which may be obtained in
the future or which would actually have been obtained had the Offer
occurred as of January 1, 2003. The pro forma presentation shows
possible scope of the change in the historical results of
operations caused by the transaction.
PRO FORMA
HISTORIC
AL
ADJUSTMENT
S
PRO
FORMA
Operating Revenue
$1,465,9
79
0
$1,465,9
79
Operating Expenses (excluding
interest)
(1,166,4
13)
0
(1,166,4
13)
Net income from investment
property
299,566
0
299,566
Interest income
0
0
0
Administrative expenses
(40,711)
0
(40,711)
Equity in earnings of
unconsolidated affiliate
90,244
0
90,244
Net income (loss) before
interest expense
349,099
0
349,099
Interest expense and debt
amortization
(393,960
)
(2,406)
(396,366
)
Net income (loss)
$(44,861)
$(2,406)
$(47,267)
PRO FORMA EARNINGS PER INTEREST
Net(loss) attributable to the
Limited Partners (99%)
$(44,412
)
$(2,382)
$(46,794
)
Net (loss) per Limited Partner
Interest
$(4.33)
$(
4.61)
Interests Outstanding
10,261.5
1
(100)
10,161.5
1
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
Earnings (loss) before interest
expenses
$349,099
0
349,099
Fixed charges
$393,960
2,406
396,366
Ratio of earnings to fixed
charges
0.89
0.88
The above ratio (fixed charge ratio) compares earnings before
interest expense to interest expense. It indicates how many times
interest charges have been earned by the Partnership.
See Notes to Pro Forma Condensed Statements of Operations, Earnings
per Interest, and Ratio of Earnings to Fixed Charges.
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Notes to Pro Forma Condensed Statements of Operations, Earnings
Per Interest, and Ratio of Earnings to Fixed Charges
For the Quarter ended March 31, 2003 (unaudited)
The following notes describe the assumptions underlying the Pro
Forma Condensed Statements of Operations, Earnings per Interest,
and Ratio of Earnings to Fixed Charges. The unaudited Pro Forma
Condensed Statements of Operations, Earnings Per Interest, and
Ratio of Earnings to Fixed Charges should be read in conjunction
with the unaudited financial statements as of March 31, 2003, and
for the quarter ended and the related notes thereto in our March
31, 2003 quarterly report on Form 10-QSB.
The pro forma financial information provided herein was prepared to
provide Limited Partners with information about the continuing
impact of the Partnership's Offer by showing how the transaction
might have affected historical financial statements if the
transaction had been consummated at an earlier time. The pro forma
statements are intended to assist Limited Partners in analyzing the
future prospects of the Partnership because they illustrate the
possible scope of the change in the Partnership's historical
financial position and results of operations caused by the Offer.
The unaudited Pro Forma Condensed Statements of Operations,
Earnings Per Interest and Ratio of Earnings to Fixed Charges were
prepared to illustrate the estimated effects of the Offer as if the
transaction had occurred on January 1, 2003.
The unaudited Pro Forma Condensed Statements of Operations,
Earnings Per Interest and Ratio of Earnings to Fixed Charges do not
purport to represent what the Partnership's results of operations,
earnings per Interest, or ratio of earnings to fixed charges, would
actually have been if the Offer in fact had occurred on January 1,
2003, or to project the Partnership's results of operations for any
period.
A. The historical Condensed Statement of Operations is based on
the unaudited financial statements as of and for the quarter
ended March 31, 2003.
B. Adjustments to the Pro Forma Condensed Statements of
Operations, Earnings Per Interest, and Ratio of Earnings to
Fixed Charges give effect to certain assumptions, including:
(a) the purchase by the Partnership of 100 Interests at the
Offer Price of $910.00 per Interest pursuant to the Offer; and
(b) an unsecured demand loan of $154,000 from an affiliate
bearing interest at 6.25% per annum. Under these assumptions,
the aggregate redemption would amount to $91,000 and the
annual interest expense in the new demand loan would be
$9,625. The Pro Forma Condensed Statements of Operations,
Earnings Per Interest, and Ratio of Earnings to Fixed Charges
give effect to the transaction as if it had occurred at the
beginning of the period presented (January 1, 2003).
C. The actual results which would have been achieved during the
pro forma period had the transaction occurred on the assumed
date may have varied from the Pro Forma Financial Statements,
and the variations may have been material.
Annex A-5
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Pro Forma Book Value of Interests
December 31, 2002
(Unaudited)
The following unaudited Pro Forma Book Value of Interests gives
effect to certain assumptions, including the purchase by the
Partnership of 100 Interests tendered by the Limited Partners at
the Offer Price of $910.00 per Interest, pursuant to the Offer,
financed by a new unsecured demand loan from an affiliate in the
amount of $154,000. The Pro Forma Balance Sheet gives effect to
the transaction as if it had occurred on December 31, 2002.
The pro forma information should be read in conjunction with the
historical financial information for the Partnership, but does not
purport to be indicative of the financial position which may be
obtained in the future or which would actually have been obtained
had the Offer occurred as of December 31, 2002. The pro forma
presentation shows the possible scope of the change in the
historical book value caused by the transactions.
PRO FORMA ADJUSTMENTS
Historical
Purchase
of
Inter
ests
Pro
Forma
Book value of outstanding
Interests
$566,257.00
$(154,000)
$412,257.00
Number of Interests
Outstanding
10,261.51
(100)
10,161.51
Book value per Interest
$55.18
$40.57
See notes to Pro Forma Statement of Book Value of Interests.
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP
Notes to Pro Forma Book Value Per Interest
December 31, 2002
(Unaudited)
The following notes describe the assumptions underlying the Pro
Forma Book Value Per Interest. The unaudited Pro Forma Book Value
Per Interest should be read in conjunction with the audited
financial statements as of December 31, 2002 and for the year then
ended and the related notes thereto included in our 2002 annual
report on Form 10-KSB.
The pro forma financial information provided herein was prepared to
provide Limited Partners with information about the continuing
impact of the Partnership's Offer by showing how the transaction
might have affected historical financial statements if the
transaction had been consummated at an earlier time. The pro forma
statements are intended to assist Limited Partners in analyzing the
future prospects of the Partnership because they illustrate the
possible scope of the change in the Partnership's historical
financial position and results of operations caused by the Offer.
The unaudited Pro Forma Book Value Per Interest was prepared to
illustrate the estimated effects of the Offer as if the transaction
had occurred on December 31, 2002.
The unaudited Pro Forma Book Value Per Interest does not purport to
represent what the Partnership's book value per Interest would
actually have been if the Offer in fact had occurred at
December 31, 2002, nor does it purport to project the Partnership's
book value per Interest for any future date.
A. The historical Book Value Per Interest is based on the audited
balance sheet as of December 31, 2002.
B. Adjustments to the Pro Forma Book Value Per Interest give
effect to certain assumptions, including: (a) the purchase by
the Partnership of 100 Interests at the Offer Price of $910.00
per Interest pursuant to the Offer; and (b) an unsecured
demand loan of $154,000 from an affiliate bearing interest at
6.25% per annum. Under these assumptions the aggregate
redemption would amount to $91,000. It is assumed that the
cost of the Offer will be $63,000. The Pro Forma Book Value
Per Interest gives effect to the transaction as if it had
occurred on the balance sheet date.
C. The book value per Interest which would have been achieved
during the pro forma period had the transactions occurred on
the assumed date may have varied from the Pro Forma Financial
Statements, and the variations may have been material.
Appendix B
LIMITED PARTNERSHIP ACTIVITY
The Purchase By the Offerors and Others
Calendar
Year
Repurchase
Price Paid
Number of
Total
Interests
Sold or
Transferre
d to the
Offerors
Transactio
ns
Purchases
By the
Partnershi
p
Purchases
by Jeffrey
Keierleber
2001
$550
444.17
22
0
444.17*
2002
$550-$895
6,525.857
700
3,135.760
3,390.097
2003
$895
0
8
0
97.250*
No Limited Partnership Interests were purchased by Related
Parties during the last 60 days.
* All transactions were effected pursuant to private
negotiations at the request of the Limited Partner.
Appendix C
FORM OF DEMAND PROMISSORY NOTE
$154,000.00
Waukesha, Wisconsin
July__ , 2003
FOR VALUE RECEIVED, DECADE COMPANIES INCOME PROPERTIES - A
LIMITED PARTNERSHIP, a Wisconsin limited partnership (the
"Borrower"), hereby promises to pay to the order of Decade
Properties Inc., a Wisconsin corporation (the "Lender"), ON DEMAND
the principal sum of ONE HUNDRED AND FIFTY FOUR THOUSAND AND 00/100
DOLLARS ($154,000.00).
1. Interest. The unpaid principal amount of this Note shall bear
interest from the date hereof until paid in full, at an annual rate
equal to 6.25%.
2. Payments. All payments due under this Note shall be made in
lawful money of the United States of America to the Lender at the
principal office of the Lender set forth below, or to such other
address, or by wire transfer to such account, as may be designated
from time to time by the Lender to the Borrower in writing.
3. Optional Prepayment. The Borrower may, at any time, prepay the
outstanding principal balance of this Note in whole or in part
without premium or penalty; provided, however, that in the event of
any such prepayment, the Borrower shall also pay all accrued and
unpaid interest on the principal amount prepaid.
4. Application of Payments. All payments on the indebtedness
evidenced by this Note shall be applied first to pay any and all
costs incurred by or on behalf of the holder hereof and next to pay
interest hereon and finally to pay principal.
5. Demand.
THE BORROWER ACKNOWLEDGES THAT IN ACCEPTING THIS NOTE THE
HOLDER MAY DEMAND PAYMENT OF THIS NOTE AT ANY TIME AND FOR ANY
REASON, WHETHER ARISING BEFORE, ON OR AFTER THE DATE HEREOF, OR FOR
NO REASON AT ALL.
THE BORROWER ACKNOWLEDGES THAT THIS NOTE IS AN OBLIGATION
WHICH IS PAYABLE ON DEMAND AND THAT NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS NOTE OR IN ANY OTHER INSTRUMENT, AGREEMENT, OR
OTHER DOCUMENT TO WHICH THE BORROWER OR THE LENDER IS A PARTY, THE
ENUMERATION IN ANY SUCH DOCUMENT OF SPECIFIC EVENTS OF DEFAULT,
CONDITIONS AND/OR COVENANTS RELATING TO THIS NOTE OR TO ANY OTHER
OBLIGATION OF THE BORROWER TO THE LENDER, SHALL NOT BE CONSTRUED TO
QUALIFY, DEFINE, OR OTHERWISE LIMIT IN ANY WAY THE HOLDER'S RIGHT,
POWER, OR ABILITY, AT ANY TIME, TO MAKE DEMAND FOR PAYMENT OF THE
PRINCIPAL OF AND INTEREST ON THIS NOTE, AND THE BORROWER AGREES
THAT THE OCCURRENCE OF ANY EVENT OF DEFAULT OR BREACH OF ANY
CONDITION OR COVENANT IN ANY SUCH DOCUMENT IS NOT THE ONLY BASIS
FOR DEMAND TO BE MADE ON THIS NOTE.
WITHOUT LIMITING THE FOREGOING, THE ENTIRE AMOUNT OF UNPAID
PRINCIPAL AND ACCRUED AND UNPAID INTEREST UNDER THIS NOTE SHALL BE
AUTOMATICALLY AND IMMEDIATELY DUE AND PAYABLE, WITHOUT NOTICE,
DEMAND OR ACTION OF ANY KIND BY THE HOLDER, IN THE EVENT THE
BORROWER (A) BECOMES INSOLVENT OR TAKES OR FAIL TO TAKES ANY ACTION
WHICH CONSTITUTES AN ADMISSION OF INABILITY TO PAY ITS DEBTS AS
THEY MATURE, (B) MAKES A GENERAL ASSIGNMENT FOR THE BENEFIT OF
CREDITORS OR TO AN AGENT AUTHORIZED TO LIQUIDATE ANY SUBSTANTIAL
AMOUNT OF ITS ASSETS, (C) BECOMES THE SUBJECT OF AN "ORDER FOR.
RELIEF" WITHIN THE MEANING OF THE UNITED STATES BANKRUPTCY CODE,
(D) FILES A PETITION IN BANKRUPTCY, OR FOR REORGANIZATION, OR TO
EFFECT A PLAN OR OTHER ARRANGEMENT WITH CREDITORS, (E) FILES AN
ANSWER TO A CREDITOR'S PETITION, ADMITTING THE MATERIAL ALLEGATIONS
THEREOF, FOR AN ADJUDICATION OF BANKRUPTCY OR FOR REORGANIZATION OR
TO EFFECT A PLAN OR OTHER ARRANGEMENT WITH CREDITORS, (F) APPLIES
TO A COURT FOR THE APPOINTMENT OF A RECEIVER OR CUSTODIAN FOR ANY
OF ITS ASSETS OR PROPERTIES, OR (G) HAS A RECEIVER OR CUSTODIAN
APPOINTED FOR ANY OF ITS ASSETS OR PROPERTIES, WITH OR WITHOUT
CONSENT, AND SUCH RECEIVER SHALL NOT BE DISCHARGED WITHIN SIXTY
(60) DAYS AFTER HIS APPOINTMENT.
6. Enforcement.
(a) The Borrower agrees to pay all reasonable fees and
expenses incurred by the Lender, including the reasonable fees of
counsel, in connection with the protection and enforcement of the
rights of the Lender under this Note, including without limitation
the collection of any amounts due under this Note and the
protection and enforcement of such rights in any bankruptcy,
reorganization or insolvency proceeding involving the Borrower.
(b) No remedy herein conferred upon the Lender is.
intended to be exclusive of any other remedy and each and every
such remedy shall be cumulative and shall be in addition to every
other remedy given under this Note or now or hereafter existing by
law. No failure or delay on the part of the Lender in exercising
any right or remedy hereunder shall operate as a waiver thereof nor
shall any single or partial exercise of any right hereunder
preclude other or further exercise.
7. Notices. All notices given hereunder shall be in
writing and delivered to the address set forth below, or to such
other address with respect to either party as such party shall
notify the other in writing; such notices shall be deemed given
when delivered:
If to the Borrower:
Decade Companies Income Properties - A Limited
Partnership N19 W24130 Riverwood Drive, Suite
100
Waukesha, Wisconsin 53188
If to the Lender:
Decade Properties Inc.
N19 W24130 Riverwood Drive, Suite 100
Waukesha, Wisconsin 53188
8. Waiver. The Borrower and all endorsers, sureties,
guarantors and other accommodation parties hereby waive presentment
for payment, protest and notice of nonpayment and consent, without
affecting their liability hereunder, to any and all extensions,
renewals, substitutions and alterations of any of the terms of this
Note and to the release of or failure by the Lender to exercise any
rights against any party liable for or any property securing
payment thereof.
9. Waiver of Jury Trial: Jurisdiction. THE BORROWER (AND THE
LENDER BY ACCEPTANCE OF THIS NOTE) HEREBY AGREE THAT:
(A) THE BORROWER AND THE LENDER IRREVOCABLY WAIVE ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS NOTE.
(B) THE BORROWER AND THE LENDER EACH AGREE TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE
OF WISCONSIN WITH RESPECT TO ANY CLAIM OR CAUSE OF ACTION ARISING
UNDER OR RELATING TO THIS NOTE, WAIVE ANY OBJECTION BASED ON FORUM
NON CONVENIENS AND WAIVE ANY OBJECTION TO THE VENUE OF ANY ACTION
RELATING TO THIS NOTE.
10. Governing Law. This Note shall be governed by the
substantive law of the State of Wisconsin.
11. No Violation. The Borrower represents that no agreement
to which he it a party would prohibit it from entering into this
agreement or enforcing any term of this agreement against it.
DECADE COMPANIES INCOME PROPERTIES
- A LIMITED PARTNERSHIP
BY DECADE COMPANIES - A GENERAL
PARTNERSHIP
GENERAL PARTNER
BY /s/Jeffrey L. Keierleber
Jeffrey L. Keierleber
General Partner of Decade
Companies
Appendix D
FAIRNESS OPINION OF THE VALUATIONS GROUP
[VALUATIONS GROUP LETTERHEAD]
June 3, 2003
Decade Companies - A General Partnership
Decade Companies Income Properties - A Limited Partnership
Riverwood Corporate Center
N19 W24130 Riverwood Drive, Suite 100
Waukesha, Wisconsin 53188
Gentlemen:
You have requested our opinion as to the fairness to the holders of limited
partnership interests ("Interests") in the Decade Companies Income Partnership
(the "Partnership") of an offer (the "Tender Offer") by the Partnership and
Jeffrey L. Keierleber (an affiliate of the Partnership) to acquire up to 3,500
of the issued and outstanding units of the Partnership at a price of $910 per
Interest.
The Valuations Group's primary business is to provide independent opinions of
value for interests in general and limited partnerships. The firm and its
principals have significant experience and knowledge of the factors which
effect the valuation and pricing of partnership interests. Prior to being
engaged to provide this fairness opinion, in the normal course of its business
The Valuations Group previously prepared an independent opinion of value
related to the Partnership for a client unrelated to this transaction.
This opinion indicated a fair market value of $899 per Interest and was based
on information available as of August 15, 2002. The Valuations Group's current
valuation based on the same methodology applied using information available as
of June 3, 2003 is $758 per Interest.
The principal causes of the valuation decrease are: (i) the reduction in the
estimated value of Town Place as indicated in an appraisal dated September 27,
2002; (ii) cash needs in excess of operating income during the intervening
period; and, (iii) an increase in the fractional interest discount derived in
The Valuations Group's analysis.
Other than the services rendered in connection with this opinion, The Valuations
Group has not provided professional services to any party to this transaction
nor is the fee payable for this opinion related to the proposed transaction's
success or failure.
In the course of rendering its opinion, The Valuations Group has:
i) Reviewed a draft of the preliminary Tender Offer documentation dated
May 28, 2003.
ii) Reviewed the Partnership's Amended and Restated Agreement of Limited
Partnership dated September 30, 1996, as amended on March 31, 2003.
iii) Reviewed and analyzed financial statements and related notes contained
in the Partnership's 2002 Annual Report on Form 10-KSB.
iv) Reviewed and analyzed financial statements and related notes contained
in the Partnership's First Quarter 2003 Quarterly Report on Form 10-Q.
v) Reviewed a limited scope appraisal of the Pelican Sound Apartments
effective April 8, 2002.
vi) Reviewed a limited scope appraisal of the Town Place Apartments
effective September 27, 2002.
vii) Reviewed the terms of purchase related to the July 30, 2002 acquisition
of the Spectrum and Plymouth Plaza office properties.
viii) Reviewed and analyzed the recent historical performance and 2003
operating budgets for all of the Partnership's investment real estate.
ix) Reviewed published data regarding capitalization rates related to
apartment and suburban office investments on a national basis, and, to the
extent available, regional and local basis.
x) Reviewed published data regarding transactions of limited partnership
interests in the informal partnership secondary market and recent tender offers
for interests in other limited partnerships.
xi) Discussed the Tender Offer and the Partnership's history and future
outlook with the Partnership's senior management.
In the course of its review, The Valuations Group did not physically inspect
the Partnership's properties. The Valuations Group has relied upon the
accuracy and completeness of the financial, appraisal, and other information
which was provided to it by the General Partner and other third parties. The
Valuations Group has not made an effort to independently verify the accuracy
and completeness of any such information. In connection with its opinion, The
Valuations Group assumes that there will be no material change in property
operations or the properties' appraised values prior to the closing of the
Tender Offer.
The Valuations Group has not been requested to, nor has it specifically
expressed or implied an opinion as to the following: (i) alternatives to the
Tender Offer; (ii) the Offeror's capacity to enter into the proposed
transaction; (iii) income tax considerations to any party involved with the
transaction; and (iv) the effect the Tender Offer may have, if any, on limited
partners electing not to tender their Interests.
Based upon, and subject to the foregoing, and other matters which we deem to be
relevant, it is our opinion that as of the date hereof the offer of $910 per
Interest is fair from a financial point of view.
Respectfully Submitted,
/s/ Michael D. Phelan
THE VALUATIONS GROUP, INC.
BY: Michael D. Phelan, as its President
Appendix E
TRANSMITTAL LETTER TO LIMITED PARTNERS
[DECADE LETTERHEAD]
July 15, 2003
RE: Decade Companies Income Properties
Dear Investor:
Enclosed with this letter is an offer by the Partnership and Mr.
Jeffrey Keierleber, severally and not jointly, to purchase your
Interests for cash consideration of $910.00 per Interest. The
enclosed documents consist of an Offer to Purchase, which you
should read carefully, and a Letter of Acceptance.
Our records show that you own the following Interests:
total Interests $1,000 = $
Cumulative cash distributions you have received: $
Net investment: $
Amount of cash consideration you will receive, if you
tender all of your Interests $
In order to accept the Offer, subject to its terms and conditions,
you must complete the enclosed Letter of Acceptance and mail or
deliver it to the Partnership on or before the Expiration Date.
The Letter of Acceptance must be signed by the person or persons in
whose name the Interests are carried on the Partnership's records
in exactly the same manner in which such name or names appear. For
your convenience we have attached a label to page one of each
Letter of Acceptance that indicates the name or names of the
Limited Partner(s), the address of record, and the number of
Interests owned. The Partnership's payment for Interests which are
tendered and accepted by the Partnership should be made on or
before five days after the Expiration Date of the Offer in the name
or names that appear on the label and will be mailed to the address
shown on the label, unless different instructions are given on the
Letter of Acceptance.
Very truly yours,
/s/ Michael Sweet
Michael Sweet
Partnership Manager
MS
Enclosures
Appendix F
LETTER OF ACCEPTANCE
To Tender Limited Partnership Interests
Decade Companies Income Properties, A Limited Partnership
Pursuant to the Offer to Purchase
Dated July 15, 2003
THIS OFFER, THE PRORATION PERIOD, AND WITHDRAWAL RIGHTS EXPIRE AT
MIDNIGHT, CENTRAL TIME, ON AUGUST 13, 2003, UNLESS EXTENDED.
To: Decade Companies Income Properties, A Limited Partnership
(ADCIP)
N19 W24130 Riverwood Drive, Suite 100
Waukesha, Wisconsin 53188-1131
(This Letter of Acceptance may be delivered to DCIP by mail or by
hand delivery at the above address, or by facsimile transmission at
(262) 522-8999. The Letter of Acceptance will be deemed to be
received at the time of actual receipt at the offices of DCIP.
Ladies and Gentlemen:
The undersigned is the Limited Partner of record and the owner of
a Limited Partnership Interest (the AInterests) of Decade Companies
Income Properties, A Limited Partnership (the APartnership). The
undersigned hereby tenders to the Partnership or Mr. Keierleber, as
the case may be (as set forth on page 3 of this Letter of
Acceptance), in accordance with the terms and conditions of the
Offerors' Offer to Purchase, dated July 15, 2003, (including the
annexes thereto and this Letter of Acceptance) (collectively the
AOffer), receipt of which is hereby acknowledged.
Subject to, and effective upon, acceptance for payment of the
Interests tendered herewith, the undersigned hereby sells, assigns
and transfers to the Partnership all right, title, claims and
interest in and to all of the Interests that are tendered hereby.
The Partnership may redeem and cancel said Interests that it may
purchase. If the Interests are purchased by Mr. Jeffrey
Keierleber, an affiliate of the Partnership, then Mr. Keierleber
will not cancel said Interests, but will continue to own them for
his own account. After acceptance for payment of the Interests by
the Partnership, the undersigned will have no right, title, claims
or interest in or with respect to the Interests tendered, other
than the right to receive in cash the Purchase Price provided in
the Offer of $910.00 per Interest. Interest means the interest of
a Limited Partner representing a Capital Contribution to the
Partnership of $1,000. The undersigned understands and
acknowledges that the Offerors may prorate the amount of Interests
accepted for purchase, as set forth in the Offer to Purchase, dated
July 15, 2003.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer
the tendered Interests and that, when the same are accepted for
payment, the Offerors will acquire good, marketable and
unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be
subject to any adverse claim. The undersigned understands that the
Partnership will cancel said Interests that it purchases. The
undersigned understands that Mr. Keierleber, an affiliate of the
Partnership will not cancel said Interests that he purchases. The
undersigned will, upon request, execute any additional documents
deemed by the Partnership to be necessary or desirable to complete
the sale, assignment and transfer of the tendered Interests.
All authority conferred or agreed to be conferred in this Letter of
Acceptance shall not be affected by, and shall survive, the death
or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators and legal representatives
of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
Unless otherwise indicated herein under Special Payment
Instructions, please issue the check for the Purchase Price in the
name(s) of the registered holder(s) and at the address stated
above. In the event that Special Payment Instructions are
completed, please issue the check for the purchase price in the
name of, and deliver said check to the person or persons at the
address so indicated.
In the event that Mr. Keierleber, an affiliate of the General
Partner, acquires the Interests, I as Assignor, for good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, do hereby transfer and assign to Mr.
Keierleber (Assignee) all of Assignor's right, title, claims, and
interest in and to Assignor's Limited Partnership Interests
described herein. Assignor, by the execution of this Transfer of
Interest, and for the same consideration, covenants with Assignee,
that Assignor is the lawful owner of and has good title to all
interest stated above and the same are free and clear of all liens,
encumbrances or adverse claims whatsoever, caused or occasioned by
Assignor.
If you are going to tender your Interests, please sign exactly as
your name(s) appears on page 1, above. See Instruction 4 before
signing. If you own any Fractional Interests and decide to tender
any Interests, such amount must be tendered so that the Limited
Partner is left owning no Fractional Interests and at least three
(3) Interests, two (2) in the case of an IRA.
Offer Price
Per Interest
Interests
Owned
Interests
Tendered
Total
Consideration
DCIP
Interests
$910
________
________
$________
The payment date or dates will be determined at the sole discretion
of the General Partner, but is expected to be promptly after the
Expiration Date, but in any event within 5 days after the
Expiration Date.
_______
(Limited Partner Signature) (Date) Social
Security Number or
Employer Identification
Number
_______
(Limited Partner Signature) (Date) Social
Security Number or
Employer Identification
Number
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1 and 5)
To be completed only if payment for Interests accepted for
purchase by the Partnership is to be made to a person other than
the Limited Partner(s) and at the address set forth at the
beginning of this Letter.
Name and/or address of payee other than registered owner at
registered address:
Name (please print)
Address
(Include Zip Code)
(Tax ID or SS Number)
Signature guarantee, if required.
See Instruction 1.
(Name of Institution)
(Signature of Officer and Title)
(Date)
INSTRUCTIONS
The Following Instructions Are Part of the Terms and Conditions
of the Offer
1. Guarantee of Signature. No signature guarantee on this Letter
of Acceptance is required unless payment is requested to be
made to a person or persons or at an address different from
that shown on the Letter of Acceptance. If payment is
requested to be made to any other person or at any other
address, all signatures on this Letter of Acceptance must be
guaranteed by a federal or state chartered bank or savings and
loan institution or by a broker-dealer that is a member of the
New York Stock Exchange, Inc.
2. Delivery of Letter of Acceptance. This Letter of Acceptance
must be delivered to the Partnership at the address and by any
of the means specified in the Letter of Acceptance, and must
be received by the Partnership prior to the Expiration Date as
defined in the Offer. The method of delivery to the
Partnership is at the election and risk of the tendering
Limited Partner. However, if delivery is by mail, the
Partnership recommends registered mail with return receipt
requested.
3. Form of Tender. No alternative, conditional or contingent
tenders will be accepted. If a Limited Partner tenders less
than all of his Interests, only whole Interests may be
retained by such Limited Partner and a minimum of three (3)
full Interests, two (2) in the case of an IRA, must be
retained. All tendering Limited Partners, by execution of
this Letter of Acceptance (or a facsimile thereof), waive any
right to receive any notice of the acceptance of their
Interests as a condition thereto and understand the
Partnership may prorate its purchases.
4. Signatures to the Letter of Acceptance. If this Letter of
Acceptance is signed by the registered holder of Interests
tendered hereby, the signature must correspond with the name
as shown at the beginning of the Letter of Acceptance. If any
of the Interests tendered hereby are owned by two or more
joint owners, all such owners must sign this Letter of
Acceptance. At the General Partner's sole discretion, the
Partnership may accept the signature of one joint owner,
provided that by executing this document such Limited Partner
hereby agrees to indemnify the Partnership from claims made by
the other joint owners concerning the Interests.
If any tendered Interests are registered in different names,
it will be necessary to complete, sign and submit as many
separate Letters of Acceptance as there are different
registrations. For example, two Letters of Acceptance would
be required for Interests owned individually by Mr. X, and by
Mr. and Mrs. X as joint tenants.
If this Letter of Acceptance is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and
submit proper evidence satisfactory to the Partnership of
their authority to so act.
5. Special Payment Instructions. If a check is to be issued in
the name of or at an address different from that shown at the
beginning of the Letter of Acceptance, such instructions must
be noted on the Letter of Acceptance and the signature of the
tendering Limited Partner(s) must be guaranteed as provided in
Instruction 1, above.
6. Waiver of Conditions. The Offerors reserve the absolute right
to waive any of the specified conditions of the Offer in the
case of Interests tendered.
7. Form W-9 Obligation. To prevent back-up federal income tax
withholding equal to 28% of the payments made pursuant to the
Offer, each tendering Limited Partner, who is not exempt
(e.g., a corporation), must provide a correct taxpayer
identification number. A substitute Form W-9 is attached and
should be completed by those Limited Partners who have not
forwarded a taxpayer identification number. If a Limited
Partner has already forwarded a Form W-9 (or substitute), you
do not need to send another Form W-9 to the Partnership.
8. Requests for Assistance. Questions and requests for
assistance should be directed to the Partnership Manager, Mr.
Michael G. Sweet, N19 W24130 Riverwood Drive, Suite 100,
Waukesha, Wisconsin 53188-1131 (phone 262-522-8990)
(facsimile 262-522-8999).
Substitute Form W-9
REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION
Name (If you are an individual, you must generally enter the name
shown on your social security card. However, if you have changed
your last name, for instance, due to marriage without informing the
Social Security Administration of the name change, enter your first
name, the last name shown on your social security card, and your
new last name. If the account is in joint names, list first and
then circle the name of the person or entity whose number you enter
in Part I of this form.)
Name:
Business name, if different from above.
C Sole proprietor. Enter your individual name as shown on your
social security card on the AName line. You may enter your
business, trade, or Adoing business as (DBA) name on the
ABusiness name line.
C Limited liability company (LLC). If you are a single-member
LLC (including a foreign LLC with a domestic owner) that is
disregarded as an entity separate from its owner under
Treasury regulations section 301.7701-3, enter the owner's
name on the "Name" line. Enter the LLC's name on the
ABusiness name line.
C Caution: A disregarded domestic entity that has a foreign
owner must use the appropriate Form W-8.
C Other entities. Enter your business name as shown on required
Federal tax documents on the AName line. This name should
match the name shown on the charter or other legal document
creating the entity. You may enter any business, trade, or
DBA name on the ABusiness name line.
Business name:
Check appropriate box: ____Individual/Sole Proprietor
____Corporation
____Partnership ____Other:__________
_____
Address (number, street, and apt. or suite no.):
City, State, and Zip Code:
Requester's Name and Address: DCIP, A Limited Partnership
N19 W24130 Riverwood Drive, Suite 100
Waukesha, Wisconsin 53188-1131
PART I - Taxpayer Identification Number (TIN)
Enter your TIN in the appropriate box.
C For individuals this is your social security number (SSN):
- - .
However, for a resident alien: If you are a resident alien and you
do not have and are not eligible to get an SSN, your TIN is your
IRS individual taxpayer identification number (TIN). Enter it in
the social security number box.
However, for a sole proprietor: If you are a sole proprietor and
you have an EIN, you may enter either your SSN or EIN. However,
the IRS prefers that you use your SSN.
However, for a disregarded entity: If you are an LLC that is
disregarded as an entity separate from its owner, and are owned by
an individual, enter your SSN (or Apre-LLC EIN, if desired). If
the owner of a disregarded LLC is a corporation, partnership, etc.,
enter the owner's EIN.
C For other entities, it is your employer identification number
(EIN): - .
PART II - For U.S. Payees Exempt From Backup Withholding
Individuals (including sole proprietors) are not exempt from backup
withholding. Corporations are exempt from backup withholding for
certain payments, such as interest and dividends. For more
information on exempt payees, see the separate Instructions for the
Requester of Form W-9.
If you are exempt from backup withholding, you should still
complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write AExempt in Part II, and
sign and date this form.
If you are a nonresident alien or a foreign entity not subject to
backup withholding, give the requester a properly completed Form W-
8BEN, W-8ECI, W-8EXP or W-8IMY, whichever is applicable.
PART III - Certification
Under penalties of perjury, I certify that:
C The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to be
issued to me), and
C I am not subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding, and
C I am a U.S. person (including a U.S. resident alien).
Certification instructions. You must cross item 2 above if you
have been notified by the IRS that you are currently subject to
backup withholding because you have failed to report all interest
or dividends on your tax return. For real estate transactions,
item 2 does not apply. For mortgage interest paid, acquisition or
abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and
generally, payments other than interest and dividends, you are not
required to sign the Certification, but you must provide your
correct TIN.
Sign Here
Signature of U.S. person:
Date: