SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Rule 13-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
Amendment No. 1
DECADE'S MONTHLY INCOME & APPRECIATION FUND -- A LIMITED PARTNERSHIP
____________________________________________________________________
(Name of the Issuer)
DECADE'S MONTHLY INCOME & APPRECIATION FUND -- A LIMITED PARTNERSHIP
____________________________________________________________________
(Name of Person Filing Statement)
Limited Partnership Interests
_______________________________
(Title of Class of Securities)
None
_______
(CUSIP Number of Class of Securities)
Jeffrey Keierleber
c/o Decade Companies
Decade's Monthly Income & Appreciation Fund--A Limited Partnership
250 Patrick Boulevard, Suite 140
Brookfield, Wisconsin 53045-5864
with copies to
Conrad G. Goodkind, Esq.
Quarles & Brady
411 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202-4497
(Names, Addresses and Telephone Numbers of Persons Authorized to
Receive Notices and Communications
on Behalf of Person Filing Statement.)
This Statement is filed in connection with (check the appropriate
box):
a. [ ] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or
Rule 13e-3(c) under the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities
Act of 1933.
c. [X] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to are preliminary copies: [ ]
This Rule 13e-3 Transaction Statement Amendment No. 1 (the
"Statement") relates to an issuer tender offer by Decade's Monthly
Income & Appreciation Fund -- a Limited Partnership (the "Partnership")
to purchase outstanding limited partnership interests (the "Interests")
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated November 21, 1995 (including the annexes thereto, the
"Offer to Purchase"), and in the related Letter of Acceptance (which
together constitute the "Offer"), copies of which are filed as
Exhibits (d)(1) and (d)(2) hereto, respectively. This Statement is
being filed by the Partnership. Capitalized terms used in this
Statement and not defined herein shall have the meanings set forth in
the Offer to Purchase.
Concurrently with the filing of this Statement, the Partnership
is filing with the Securities and Exchange Commission, Amnedment No. 1
to a Schedule 13E-4 Issuer Tender Offer Statement. A copy of the Offer
to Purchase is attached as Exhibit 1 thereto. The information contained
in the Offer to Purchase is incorporated by reference in answer to the
items of this Statement and the Cross Reference Sheet set forth below
shows the location in the Offer to Purchase of the information required
to be included in response to the items of this Statement. The information
contained in the Offer to Purchase, including all exhibits and annexes
thereto, is hereby expressly incorporated by reference and the
responses to each item herein are qualified in their entirety by
reference to the information contained in the Offer to Purchase and
the exhibits and annexes thereto.
CROSS REFERENCE SHEET
(Pursuant to General Instruction to Schedule 13E-3)
Item of Location in Offer to Repurchase
Schedule 13E-3 (for incorporation by reference)
Item 1. Issuer and Class of Security Subject to the
Transaction.
(a) "The Partnership--Background of the Partnership."
(b) "The Partnership--Background of the Partnership."
(c) "Lack of Market and Distributions."
(d) "Lack of Market and Distributions."
(e) Not Applicable.
(f) Not Applicable.
Item 2. Identity and Background.
This Schedule 13E-3 is being filed only by the Partnership, the issuer
of the class of securities which is the subject of this Rule 13e-3
transaction.
(a)-(d) "The Partnership--Background of the Partnership."
(e)-(f) During the past five years, neither the Partnership nor
any of the persons enumerated in General Instruction C
to Schedule 13E-3 has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors) or (ii) 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 further violation of, or prohibiting
activities subject to, federal or state securities laws
or finding any violation of such laws.
(g) All relevant persons are citizens of the United States of
America.
Item 3. Past Contacts, Transactions or Negotiations.
(a) Not Applicable as the Schedule is being filed by the issuer
alone.
(b) "The Partnership--Interests of Certain Persons in the
Offer."
Item 4. Terms of the Transaction.
(a) "The Offer."
(b) "The Offer--Proration Rights."
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a)-(g) "The Partnership--Certain Effects of the Offer;" "The
Partnership--Conduct of the Partnership After the
Offer."
Item 6. Source and Amount of Funds or Other Consideration.
(a)-(d) "Financing the Offer."
Item 7. Purposes, Alternatives, Reasons and Effects.
(a)-(c) "The Partnership--Background for the Offer."
(d) "The Partnership--Certain Effects of the Offer."
Item 8. Fairness of the Transaction.
(a)-(f) "The Partnership--Determination of the Offer Price."
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a)-(c) "The Partnership--November 1994 Appraisal of The
Meadows I;" "The Partnership--Opinion of The Valuations
Group."
Item 10. Interest in Securities of the Issuer.
(a)-(b) "Security Ownership."
Item 11. Contracts, Arrangements or Understandings with Respect to
the Issuer's Securities.
"The Partnership--Interests of Certain Persons in the
Offer."
Item 12. Present Intention and Recommendation of Certain Persons with
Regard to the Transaction.
(a) "The Partnership--Interests of Certain Persons in the
Offer."
(b) "Security Ownership;" "The Offer."
Item 13. Other Provisions of the Transaction.
(a) "The Offer."
(b)-(c) Not Applicable.
Item 14. Financial Information.
(a) "Financial Statements."
(b) "Pro Forma Financial Data."
Item 15. Persons and Assets Employed, Retained or Utilized.
(a)-(b) "The Offer;" "Financing the Offer--Estimated Costs and
Fees."
Item 16. Additional Information.
The Offer, the Annex and Exhibits attached hereto.
Item 17. Material to be filed as Exhibits
(a) Not Applicable
Page Number is
Sequentially
Numbered in
Amendment No.
1 to Schedule
(b) (1) Fairness opinion of The Valuations Group
(attached as Annex B to the Offer to
Purchase).
(2) Appraisal of The Meadows I, Report Letter *
dated November 18, 1994, of T.M. Warner MAI,
SRA.
(3) Analysis of The Valuations Group forwarded to
the Partnership supporting fairness opinion.
(c) Not Applicable.
(d) (1) Offer To Purchase, dated November 21, 1995.
(2) Letter of Acceptance.
(3) Cover letter to Limited Partners
(e) Not Applicable.
(f) Not Applicable.
*Previously Filed
SIGNATURES
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.
Dated: November 21, 1995.
DECADE'S MONTHLY INCOME & APPRECIATION
FUND -- A LIMITED PARTNERSHIP
BY: /s/Jeffrey Keierleber
Jeffrey Keierleber, General
Partner of Decade Companies,
General Partner of the
Partnership
Offer to Purchase Interests of
Decade's Monthly Income & Appreciation Fund--A Limited Partnership
For Cash Consideration of $800 Per Interest
This offer, the proration period and withdrawal rights will expire at
12:00 midnight, Milwaukee time, on December 21, 1995, unless extended.
Decade's Monthly Income & Appreciation Fund--A Limited
Partnership (the "Partnership") invites its Limited Partners to tender
limited partnership interests (the "Interests") in the Partnership for
the cash purchase price of $800 per Interest upon the terms and
subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Acceptance (which together constitute the
"Offer"). All Interests properly tendered and not withdrawn will be
purchased for $800 per Interest, net to the seller in cash, upon the
terms and subject to the conditions of the Offer. While this is an
Offer for all Interests, in the event that more than 1,313 Interests
are tendered and the Partnership determines not to, or is unable to,
borrow additional funds upon acceptable terms, the tendered Interests
will be prorated for payment. See "The Offer." If the Partnership
obtains financing to purchase additional Interests, the Partnership
will prepare and disseminate supplemental material on the financing
terms and, if required, will extend the December 21, 1995 expiration
date. This Offer is not conditioned on any minimum number of
Interests being tendered, but is subject to the proration rights
described herein.
In deciding whether to tender Interests, a Limited Partner should
evaluate and consider the risks associated with tendering all or part
of the Interests and the risks associated with continuing to hold all
or part of the Interests.
The $800 Offer Price is below the September 30, 1995, $859
net asset value per Interest as determined by The Valuation
Group. Such net asset value does not include the costs of
liquidating and winding up the Partnership, completing its
required filings, or the costs of conducting the Offer, but
does include the Partnership's share of proceeds from
settling a lawsuit. See "The Partnership - Background of
the Partnership."
Selecting the Offer Price necessarily involved a conflict of
interest as the Partnership and non-tendering Limited
Partners would prefer a lower price and the tendering
Limited Partners would prefer a higher price.
If there are fewer than 300 remaining Limited Partners after
completion of the this Offer, the Partnership intends to
terminate the registration of Interests under the Securities
Exchange Act of 1934, which will result in Limited Partners
receiving less information than if the registration
continued.
When the Partnership was originally formed, the General
Partner originally intended to sell the Partnership's
property within seven to nine years after the Partnership's
acquisition, which would be in approximately one to three
years after the date of the Offer. The General Partner now
believes the Partnership may have to retain the property for
an additional period of time in order to maximize the
potential profits. See "The Partnership -- Background of
the Offer," "The Partnership -- Certain Effects of the
Offer" and "The Partnership -- Conduct of the Partnership
After the Offer."
The General Partner has decided to use the proceeds of the
settlement to fund this Offer rather than distribute to
Limited Partners.
Neither the Partnership nor Decade Companies, its General
Partner, makes any recommendation to any Limited Partner as to whether
to tender or refrain from tendering Interests and no person has been
authorized to make any recommendation on behalf of the Partnership as
to whether Limited Partners should tender or refrain from tendering
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 in this Offer. If given or made,
such recommendation, information or representation must not be relied
upon as having been authorized by the Partnership.
Limited Partners desiring to tender all or, subject to the terms
discussed herein, any portion of their Interests should complete and
sign the Letter of Acceptance, or a facsimile copy thereof, in
accordance with the instructions in the Letter of Acceptance, and mail
or deliver it along with any other required documents to the
Partnership. A Limited Partner having Interests registered in the
name of a broker, dealer, commercial bank, trust company or other
nominee must contact that broker, dealer, commercial bank, trust
company or other nominee and have such holder complete the Letter of
Acceptance if such Limited Partner desires to tender such Interests.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES ADMINISTRATOR OF
ANY STATE, NOR HAS THE COMMISSION OR SUCH ADMINISTRATOR PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Offer to Purchase is November 21, 1995.
OFFER TO PURCHASE
TABLE OF CONTENTS
Page
SUMMARY OF CERTAIN INFORMATION . . . . . . . . . . . . . . . . . . 1
THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Background of the Partnership . . . . . . . . . . . . . . . . 3
Background of the Offer . . . . . . . . . . . . . . . . . . . 3
Determination of the Offer Price . . . . . . . . . . . . . . . 4
November 1994 Appraisal of The Meadows I . . . . . . . . . . . 5
Opinion of The Valuations Group . . . . . . . . . . . . . . . 6
Interests of Certain Persons in the Offer . . . . . . . . . . 8
Certain Effects of the Offer . . . . . . . . . . . . . . . . . 8
Conduct of the Partnership After the Offer . . . . . . . . . . 9
Certain Federal Income Tax Consequences of the Offer . . . . . 9
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . 13
Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . 13
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Proration . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Procedures for Tendering Interests . . . . . . . . . . . . . . 14
Signature Guarantees and Method of Delivery . . . . . . . . . 15
Withdrawal Rights. . . . . . . . . . . . . . . . . . . 15
Certain Conditions . . . . . . . . . . . . . . . . . . . . . . 16
Estimated Costs and Fees . . . . . . . . . . . . . . . . . . . 17
FINANCING THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . 18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Bank Financing . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF THE LIMITED PARTNERSHIP INTERESTS . . . . . . . . . 18
BUSINESS OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . 18
LACK OF MARKET AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . 20
SECURITY OWNERSHIP OF THE GENERAL PARTNER . . . . . . . . . . . . . 21
SUMMARY HISTORICAL FINANCIAL INFORMATION . . . . . . . . . . . . . 22
PRO FORMA FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . 23
Notes to Pro Forma Financial Statements
December 31, 1994 and September 30, 1995 . . . . . . . . . . . . . 30
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . 31
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 31
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 32
SUMMARY OF CERTAIN INFORMATION
The following is a summary of certain information contained
elsewhere in this Offer. This summary does not purport to be complete
and is qualified in its entirety by reference to the more detailed
information contained elsewhere in this Offer and the Annex and
Exhibits hereto. Capitalized terms used but not defined in this
Summary are defined elsewhere in this Offer. Limited Partners are
urged to read this Offer to Purchase and the Annex and Exhibits in
their entirety.
The Offer
Offeror . . . . . . . . . . . . . The Partnership, a Wisconsin
limited partnership, invites all
of its Limited Partners to tender
their Interests upon the terms and
subject to the conditions of this
Offer. See "The Partnership--
Background of the Partnership."
Offer Price . . . . . . . . . . . $800 Per Limited Partnership
Interest. See "The Partnership--
Determination of the Offer Price."
Offer Expiration Date . . . . . . December 21, 1995, unless extended
by the Partnership. See "The
Offer."
Offer Conditions . . . . . . . . This Offer is for all Interests
and subject to the terms and
conditions of this Offer, the
Partnership will purchase all of
the Interests tendered and not
withdrawn, provided, however, that
if more than 1,313 Interests are
tendered and the Partnership, in
its sole discretion, determines
not to, or is unable to, borrow
additional funds upon acceptable
terms, the Partnership will
prorate the tendered Interests as
set forth herein. See "The Offer-
-Certain Conditions" and
"Financing The Offer." If a
Limited Partner tenders any
Interests and owns Fractional
Interests, an amount of Interests
must be tendered such that a
Limited Partner no longer owns any
Fractional Interests. If a
Limited Partner tenders less than
all of their Interests, a minimum
of three (3) Interests must be
retained. See "The Offer."
Procedures to Tender Interests . A Limited Partner who desires to
tender, subject to the terms and
conditions herein, all or any
portion of their Interests should
complete and sign the Letter of
Acceptance and mail or deliver it
to the Partnership by the
Expiration Date. See "The Offer--
Procedures for Tendering
Interests."
Financing the Offer . . . . . . . As of the date of this Offer, the
Partnership has sufficient cash
reserves to purchase 1,313
Interests and may borrow
additional funds to purchase
additional Interests. In case
more than 1,313 Interests are
tendered and the Partnership does
not or is not able to arrange
financing, tendered Interests will
be prorated. If the Partnership
obtains financing to purchase
additional Interests, the
Partnership will prepare and
disseminate supplemental material
on the financing terms and may
extend the December 21, 1995,
expiration date. See "Financing
the Offer."
Proration Terms . . . . . . . . . Upon the terms and subject to the
conditions of the Offer, the
Partnership will accept for
purchase all Interests tendered by
the Expiration Date, provided that
if more than 1,313 Interests are
tendered and the Partnership does
not, or cannot, obtain additional
financing, upon acceptable terms,
to purchase such additional
Interests, the Partnership will
prorate purchases. See "The
Offer--Proration." In the event
of proration, the Partnership will
first accept all of the tenders
from Limited Partners who own less
than 100 Interests and who tender
all of their Interests by the
Expiration Date. If this amount
is still in excess of 1,313 and
the Partnership does not, or
cannot, borrow additional funds to
purchase Interests, the
Partnership will prorate purchases
based upon the ratio of the number
of Interests tendered by each
Limited Partner who tendered all
of their Interests by the
Expiration Date to the total
number tendered by all Limited
Partners who tender all of their
Interests and own less than 100
Interests by the Expiration Date.
In prorating purchases, the
General Partner intends to
purchase an amount so that a
Limited Partner after proration
holds three or more Interests and
no Fractional Interests. After
this category of tendering Limited
Partners has been satisfied and if
there are any funds to purchase
any other Interests tendered, the
Partnership will prorate purchases
from Limited Partners who tendered
some, but not all, of their
Interests or who own more than
100 Interests 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 Partnership may round the
prorated amount such that a
Limited Partner after the Offer
will hold at least three Interests
and will not hold any Fractional
Interests. See "The Offer--
Proration."
Certain Effects of the
Repurchase Offer . . . . . . . As a result of the Offer,
affiliates of the General Partner,
and Limited Partners who do not
tender their Interests, will
acquire a greater share of the
equity, profit, and losses of the
Partnership, and 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. See "The
Partnership--Interests of Certain
Persons in the Offer," "The
Partnership--Certain Effects of
the Offer" and "The Partnership--
Conduct of the Partnership After
the Offer."
Opinion of Financial Advisor . . The Valuations Group has rendered
a written opinion that, subject to
the assumptions set forth therein,
the Offer of $800 per Interest is
fair to such holders. The full
text of the written opinion, dated
as November 17, 1995, which sets
forth the assumptions made,
procedures followed, matters
considered and limits of its
review, is attached as Annex B.
Holders of interests are urged to
and should read such opinion in
its entirety. See "The
Partnership--Opinion of The
Valuations Group."
Federal Income Tax Consequences . The receipt of cash for Interests,
pursuant to the Offer will be a
taxable transaction for federal
income tax purposes under the
Internal Revenue Code of 1986, as
amended, and also may be a taxable
transaction under applicable
state, local, foreign and other
tax laws. See "The Partnership--
Certain Federal Income Tax
Consequences of the Offer."
Cash Distributions . . . . . . . The General Partner does not
intend to make cash distributions
to Limited Partners until the
Offer has been consummated or
terminated. After the Offer has
been consummated, the Partnership
intends to make cash
distributions, to the extent that
cash is available, in accordance
with the Partnership Agreement.
See "The Partnership--Certain
Effects of the Offer" and "The
Partnership--Conduct of the
Partnership After the Offer."
Questions . . . . . . . . . . . . Questions and requests for
assistance, or for additional
copies of this Offer to Purchase,
and the Letter of Acceptance, may
be directed to the Partnership at
its offices at 250 Patrick
Boulevard, Suite 140, Brookfield,
Wisconsin 53045-5864, telephone
(414) 792-9200, facsimile (414)
792-0808, Attention: Michael
Sweet.
THE PARTNERSHIP
Decade's Monthly Income & Appreciation Fund -- a Limited
Partnership (the"Partnership") invites its limited partners ("Limited
Partners") to tender limited partnership interests ("Interests") at
the net price of $800 per Interest (the "Offer Price"), to the
tendering Limited Partner in cash, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related
Letter of Acceptance (which together constitute the "Offer"). The
$800 amount will be prorated in respect of fractional limited
partnership interests ("Fractional Interests"). All references to
Interests shall include Fractional Interests, unless the context
otherwise requires.
Neither the Partnership nor its General Partner makes any
recommendation to any Limited Partner as to whether to tender or
refrain from tendering Interests. Each Limited Partner, after
evaluating and considering the risks associated with tendering or
continuing to hold Interests, must make his or her own decision
whether to tender Interests and, if so, how many Interests to tender.
Background of the Partnership
The Partnership is a limited partnership formed under the
Wisconsin Uniform Limited Partnership Act to invest in existing
residential real properties and to make equity-participating and other
loans on income-producing real properties that are secured by a first
or junior mortgage liens. The general partner of the Partnership is
Decade Companies, a Wisconsin general partnership, (hereafter "General
Partner") of which Jeffrey Keierleber and Decade 80, Inc. are
currently the general partners. Decade 80, Inc. is entirely owned by
Jeffrey Keierleber. Prior to December, 1992, Harold Barian was also a
general partner in Decade Companies. The principal office of the
Partnership and Decade Companies is located at 250 Patrick Boulevard,
Suite 140, Brookfield, Wisconsin 53045-5864, Telephone (414) 792-9200.
In March, 1988, the Partnership began raising capital through
sale of its Interests. In January, 1989, the Partnership used
approximately $2.8 million of its funds to acquire The Meadows I
Apartments ("The Meadows I"), an 88-unit residential apartment complex
located in Madison, Wisconsin. Since January, 1989, the Partnership
has been engaged solely in the business of owning and operating The
Meadows I. See "Business of the Partnership."
In 1989, the Partnership and a number of its affiliates brought a
lawsuit against the Partnership's former attorneys and their
malpractice insurance carrier seeking damages incurred as a result of
certain acts and omissions that ultimately caused the Partnership to
curtail its capital formation efforts and to undertake a rescission
for all Interests purchased after December 7, 1988. In 1994, the
parties agreed to settle the lawsuit and, in February, 1995, an
allocation of settlement proceeds was stipulated to by all parties
whereby $1,486,900 of a $5,750,000 settlement, exclusive of interest,
was received by the Partnership in March, 1995.
At the close of business on September 30, 1995, the Partnership's
4,751.16 Interests were held by 616 Limited Partners. See
"Description of the Limited Partnership Interests."
Background of the Offer
In 1995, the Partnership received $1,486,900 as a settlement from
the lawsuit against its former attorneys and their malpractice
insurer. The settlement of the lawsuit created an opportunity for the
Partnership, through its General Partner, to reassess its business
options and to re-evaluate its future course action. The Partnership
originally intended to acquire other residential or commercial
properties in 1989 and 1990, in addition to The Meadows I, in an
attempt to achieve diversification and thereby minimize the effect of
changes on local economic conditions and certain other risks. The
Partnership's original plan included the purchase of primarily
residential properties in different geographic locations. Such
diversification was not possible because of the limited funds realized
from the original offering.
Based upon conversations with Limited Partners and their
representatives, the General Partner believes that there are certain
Limited Partners who desire to sell their Interests immediately for
cash in order to obtain liquidity and other Limited Partners who do
not need or desire the liquidity and would prefer the opportunity to
retain their Interests in order to benefit from any potential future
capital appreciation that may be realized from continued operation and
eventual sale of the Partnership's property or other properties to be
acquired. The General Partner believes that the Limited Partners
should be entitled to make a choice between immediate liquidity and
continued ownership and, thus, believes that the Offer being made
hereby accommodates the differing goals of both groups of Limited
Partners.
The General Partner considered the possibility of expanding
existing real estate operations by seeking the acquisition of
additional investment properties through leveraging the Partnership.
Although the General Partner strongly favors the alternative of
expanding real estate operations, it has determined to use Partnership
existing cash reserves in this Offer to provide Limited Partners a
choice. The General Partner may in the future reconsider the merits
of expanding the Partnership's real estate operation. See "The
Partnership--Conduct of the Partnership After the Offer."
The General Partner also considered the advisability of a pro
rata distribution of cash reserves, inclusive of the settlement
proceeds. The General Partner does not believe that such an approach
would be the best alternative. The General Partner had originally
expected a much higher capitalization of the Partnership (up to $30
million) to justify the administrative overhead of the Partnership,
including the costs of complying with the ongoing requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), but
due to the problems which gave rise to the lawsuit commenced in 1989,
the Partnership raised only approximately $4.7 million of capital
after the rescission offer. At the current $4.7 million level of
capital, the General Partner believes it is a more efficient use of
the Partnership's capital either to (i) terminate its public reporting
requirements and continue to operate The Meadows I and possibly
acquire other real estate properties and leverage the Partnership, or
(ii) sell the property at the prevailing market price, wind up the
affairs of the Partnership, liquidate, and distribute the net sale
proceeds and other assets. Based upon (i) its experience in real
estate (ii) the long term historical increase in real estate values in
the Madison, Wisconsin area, and (iii) the General Partner's
perception that financial institutions are increasingly willing to
lend to developers and real estate investors, which should result in
an increase in selling prices for real estate properties, the General
Partner believes the current value of The Meadows I is more likely
than not to increase in the future, provided the Partnership holds the
property for a period of time and, therefore, does not believe it is
the optimal time to sell the property and liquidate the Partnership.
The General Partner believes that continued ownership by the
Partnership of its property is in the long-term best interests of
those Limited Partners willing and able to maintain their investment
in the Partnership. There can, of course, be no assurance that such
appreciation will occur, or, if it does occur, that it will result in
any specific level of return to the remaining Limited Partners.
In determining to make the Offer, the General Partner also
considered that the Partnership has held The Meadows I since 1989 and
the General Partner originally intended to sell the property within
seven to nine years after the Partnership's acquisition of its
investment properties. However, the General Partner now believes the
Partnership may be required to retain the property for a substantial
additional period in order to maximize the potential profit on sale.
Consequently, the General Partner decided the Partnership should
undertake this Offer in order to permit the Limited Partners either to
sell their Interests at a price determined to be fair by an
independent third party, while offering other Limited Partners the
option of holding their Interests subject to the potential of future
gain or loss. Limited Partners who tender their shares pursuant to
the Offer are, in effect, exchanging the certainty and liquidity of a
current sale for the potentially higher return of continued ownership
of their Interests, but the continued ownership of Interests also
entails the risk of loss of all or a portion of the investment.
Once the Offer is completed, and if the number of Limited
Partners is reduced to less than 300, the Partnership will proceed
with deregistration of the Interests under the Exchange Act in order
to reduce the administrative overhead associated with compliance under
the federal securities laws. See "The Partnership--Certain Effects of
the Offer" and "The Partnership--Conduct of the Partnership After the
Offer."
Under the Amended and Restated Agreement of Limited Partnership,
dated August 11, 1987 (the "Partnership Agreement,") the Limited
Partners have the right upon a majority vote of the Interests to
remove the General Partner and then designate a new General Partner,
who would select an alternative other than this Offer. As of the date
of this Offer, the General Partner is not aware of any efforts to
remove the General Partner or seek a substitute.
Determination of the Offer Price
The Offer Price represents the price at which the Partnership is
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.
The General Partner is not aware of any other offers in the last three
years, other than a purchase of two Interests for $230 per Interest in
September, 1994. For the reasons set forth in this Offer, the General
Partner believes $800 per Interest is fair to the Limited Partners.
Limited Partners are urged to consider carefully all of the
information contained in this Offer and to consult with their own
advisors, including tax and financial advisors, in evaluating the
terms of this Offer before deciding whether to tender their Interests.
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, and the current
state of the real estate market in Madison, Wisconsin, 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 must seek a buyer for their Interests in negotiated
transactions.
The General Partner also determined that the liquidation value of
the Partnership's property is uncertain at this time. During the past
two years, the General Partner has not received any offers to purchase
or exchange the Partnership's property (or expression of interests to
such effect). Because there has been no offer for the Partnership's
property, it is not possible precisely to determine what price a
potential purchaser would be willing to pay for the Partnership's
property.
In selecting an Offer Price, the value of the Partnership's real
property, The Meadows I, as determined by an appraisal was considered.
The appraisal set the fair market value at $3,075,000 as of November
18, 1994. A copy of the appraisal report is included as Annex A and
Limited Partners are urged to review the appraisal in its entirety.
There can be no assurance that the property could be sold at this
point, or in the future, for its November 1994 appraised value. It is
possible that a sale at this time might yield a price which is either
greater or lesser than the appraised amount. However, based upon (i)
its experience in real estate, (ii) the long term historical increase
in real estate value in The Meadows, (iii) the General Partner's
perception that financial institutions are increasingly willing to
lend to developers and real estate investors, which should result in
the increased sales prices for real estate properties, the General
Partner believes that the value of the Partnership's property is more
likely than not to increase in the future, provided the Partnership
holds the property for a period of time sufficient to permit a further
strengthening in the real estate market in general and the Madison,
Wisconsin metropolitan real estate market in particular.
In October, 1995, The Valuations Group orally informed the
General Partner that the Interests, utilizing various methods, could
be valued from a range of $424 (under a fair market value method) to
$859 (under a net asset value method) per Interest. Based upon all
these factors, including, but not limited to, The Valuations Group
analysis, the General Partner selected $800 per Interest as the Offer
Price, which The Valuations Group opined would be fair, from a
financial point of view, to such holders. At this price, and after
considering the cash distributions (of between $250 and $333 per
Interest that a holder, depending upon the date of purchasing the
Interest) received and the tax losses previously allocated with
respect to the Interests, a Limited Partner who tenders will receive
more than their original price at which the Interests were sold by the
Partnership.
In determining the Offer Price, the General Partner has not
derived a definitive calculation of the liquidation value per
Interest. In selecting the Offer Price, the General Partner did
consider that The Valuations Group derived a net asset value of $859
per Interest. The General Partner then projected that the costs of
the Offer, the costs of liquidating the Partnership, the costs of the
winding up offers and completing its filings to be approximately $55
per Interest. Furthermore, the General Partner believed it
appropriate to reserve for estimated expenses and liabilities and the
General Partner, after considering the most recent September 1994
purchase was for $230 an Interest, then selected an $800 Offer Price,
which is the approximate net asset value after consideration of these
factors.
November 1994 Appraisal of The Meadows I
The appraisal of The Meadows I was performed by an independent
appraiser, T.M. Warner, MAI, SRA. The appraiser was selected on the
basis of his general qualifications and cost. Mr. Warner has
previously performed similar services for other partnerships sponsored
by the General Partner and affiliates. However, there is no material
relationship between (i) the appraiser, his affiliates and
representatives, and (ii) the Partnership or its General Partner or
affiliates. No limitations were imposed on the scope of the
investigation of the appraiser. The report letter of the appraiser is
set forth in Annex A. Mr. Warner, MAI, SRA appraised the property at
$3,075,000 as of November 18, 1994.
In preparing the appraisal, T.M. Warner utilized three basic
techniques for estimating market value: cost, income, and market data
(or direct sales comparison). These approaches were then reconciled
to a final estimate of value. The cost technique is based on the
proposition that an informed purchaser would pay no more than the cost
of producing a substitute property with the same utility as the
subject property. This technique calls for comparison, weighing and
relating sales data to the land and property (including improvements)
being appraised. Greatest weight is placed on actual sales of similar
properties made at times concurrent with the date of the appraisal and
under comparable conditions. Whenever pertinent, consideration was
given to prices asked by owners and offers made by prospective
purchasers willing to buy. See the Appraisal report, which is Exhibit
A, for additional details. The income technique 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 upon the underlying premise that income producing
real estate is typically purchased as an investment, and 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. The market data or direct sales
comparison technique 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. Utilizing these techniques, the
appraiser concluded $3,075,000 was the fair value. There can be no
assurances that The Meadows I will sell for an amount equal to, or
greater than, the appraised amount.
Opinion of The Valuations Group
In October, 1995, the Partnership retained The Valuations Group
to provide an opinion in connection with the fairness of the Offer
Price. The Partnership selected The Valuations Group for its
familiarity and experience with valuing limited partnership interests,
its independence from the Partnership and the price and scheduling
terms on which it agreed to perform its services. The Partnership
placed no limits on the scope of analysis and investigation and no
deadline was set by which it had to complete its analysis. In
October, 1995, the Partnership was orally informed, and on November
17, 1995, it confirmed in writing, that in the opinion of the
Valuations Group, an Offer Price of $800 per Interest was fair to
holders from a financial point of view. The Valuations Group's
opinion is not required to be updated after the date of this Offer so
as to take account of material developments, if any, which may
thereafter occur or may come to its attention. A copy of the written
opinion dated as of November 17, 1995, is attached hereto as Annex B.
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
information provided to it by the Partnership, including its recent
filings with the Securities and Exchange Commission and the November
1994 appraisal report. The Valuations Group did not make or obtain
appraisals of the Partnership's assets, but relied upon the November
1994 appraisal of The Meadows I and did not solicit third parties who
might be interested in acquiring all or a part of the Partnership or
the property. See "The Partnership--November 1994 Appraisal of The
Meadows I." The Valuations Group reviewed the key assumptions of the
appraiser and believes the assumptions and the resulting conclusion to
be both reasonable and adequately documented.
In reaching its conclusions as to the fairness of the Offer, The
Valuations Group utilized a variety of valuation techniques and
performed a number of analyses, a summary of which is set forth below.
In forming its opinion, The Valuations Group has reviewed the
Partnership's recent Securities and Exchange Commission filings and
data published in real estate industry publications. In August, 1995
for a client unrelated to the Partnership, The Valuations Group
concluded $415 was the fair market value for an Interest. The
Valuations Group has informed the Partnership that in deriving this
$415 August 1995 fair market value for an unrelated client, it used a
similar methodology as described below, but the information was based
upon June 30, 1995 Partnership data and was not an opinion in
connection with a transaction, but only an estimate of the fair market
value for an Interest in the Partnership.
The principal methods, techniques and their outcomes supporting
the opinion are summarized in the following paragraphs.
As part of its review, The Valuations Group sought information
about recent sales of the Interests. The Valuations Group, based upon
information from the General Partner and its own research, is only
aware of one sale of the Interests, which occurred in September, 1994
for $230 per Interest for two Interests. The Offer Price is
approximately 247% in excess of such price.
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 sole property were sold at its
appraised value and its then outstanding liabilities were satisfied as
of September 30, 1995. Net asset value per Interest is equal to
appraised value (e.g., $3,075,000) less selling costs plus net other
assets and liabilities (e.g., cash, receivables, less payables). This
amount does not consider costs of liquidating the Partnership,
completing all of the filings required with 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 $859 per Interest. The Offer Price, which does
consider the costs of liquidating the Partnership (and other related
costs) and the costs of this Offer, is a 6.8% discount to this derived
net asset value.
As an additional part of its review, The Valuations Group also
analyzed recent trading prices for limited partnership interests
trading on the limited partnership secondary market. These
transactions typically occur at prices which are substantially
discounted to the partnership's net asset value. A recent study,
conducted by Partnership Profiles (Dallas, TX) and reported in the
June 1995 issue of the Partnership Spectrum, found average discounts
for 32 non-distributing equity limited partnerships ranging from 40%
to 86% of partnership's net asset values, with an average discount of
64%. These 32 partnerships and their discounts are: Angeles Partners
IX (78%), Angeles Partners XII (81%), Beverly Hills Medical Office
(66%), Copley Realty Income 2 (40%), Davidson Diversified R.E. III
(86%), First Capital Income Props. XI (62%), First Capital
Income/Growth XII (60%), HCW Pension Real Estate (67%), Hotel
Properties LP (64%), Hutton/ConAm Realty 4 (42%), Hutton/GSH
Commercial Props. I (65%), Hutton/GSH Commercial Props. 4 (59%), JMB
Income Properties IV (66%), JMB Income Properties IX (56%), JMB Income
Properties V (65%), JMB Income Properties VIII (56%), Manhattan Beach
Hotel Partners (53%), Mid-Atlantic Centers LP (64%), PaineWebber
Equity Partners I (61%), PaineWebber Income Props. 4 (80%),
PaineWebber Income Props. 5 (68%), PaineWebber Income Props. 7 (78%),
PaineWebber Income Props. 8 (81%), PaineWebber Growth Partners III
(71%), Pru-Bache/A.G. Spanos Realty I (52%), Scottsdale Land Trust
(56%), Shelter Properties I (64%), Shelter Properties III (64%),
Shelter Properties IV (60%), Shelter Properties VI (57%), Shopco
Regional Malls, L.P. (62%), and Stamford Towers LP (69%). Based upon
this method and applying a 64% discount to The Valuations Group's
derived net asset value of for the Partnership, The Valuations Group
estimated a trading market value of $309 per Interest.
As part of its review, The Valuations Group also estimated a
value for the Interests based upon multiples of past cash flow.
According to the July 1995 Partnership Profiles study, the average
trading prices during the 60-day period ended May 31, 1995, for
partnerships which own residential real estate (multi-family, senior
housing, and mobile home) to each respective partnership's 1994 cash
flow ranged from a low multiplier of 4.8 to a high multiplier of 20,
with an average multiplier of 9.0. The partnerships and the cash flow
multiplier reported were: American Retirement Villas I (10.3x),
American Retirement Villas II (12.9x), Balcor Current Income - 87
(8.3x), Balcor Equity Properties - XVIII (7.1x), Balcor Realty
Investors - 82 (8.8x), Balcor Realty Investors - 83 (9.0x), Balcor
Realty Investors 85-I (9.3x), Century HillCreste Apt. Investors
(8.8x), Hutton/ConAm Realty 81 (8.9x), Hutton/ConAm Realty 2 (11.1x),
Hutton/ConAm Realty 3 (7.9x), Hutton/ConAm Realty 5 (10.7x),
IDS/Balcor Income Partners (9.2x), PaineWebber Indep. Living Mtg. I
(10.2x), PaineWebber Indep. Living Mtg. II (8.9x), Pru-Bache/A.G.
Spanos Genesis Inc. I (12.8x), Senior Income Fund (9.5x), Uniprop MHC
Income Fund (10.4x), Uniprop MHC Income II (9.8x), Windsor Park Props.
4 (11.2x), and Windsor Park Props 6 (10.3x). Based upon this method
and the average reported cash flow multiplier of 9.0x and the
Partnership's estimated cash flow, The Valuations Group estimated a
value of $202 per Interest. The Partnership Profiles article was part
of the information considered by The Valuations Group. Partnership
Profiles did not express an opinion on the value of the Interests, nor
has it given its approval or endorsement of The Valuation Group's
opinion, and it was not asked to do either.
The Valuations Group also considered that fractional, non-
controlling interests in limited partnerships typically trade at
discounts to the partnership's net asset value and has prepared a
report based upon its own methodology. 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 considered 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, capital structure (debt vs.
equity), liquidation time horizon, goodwill, recent historical
performance, and analytical complexity. Factors which figured most
prominently in deriving the discount appropriate to estimate the price
for a non-controlling interest in the Partnership where (i) the
absence of meaningful trading activity for Interests in the
Partnership; (ii) lack of current distributions; (iii) the recent
weakening of Partnership operating fundamentals (which included the
reduction in property net operating income from 1992 to 1994, and the
first quarter of 1995 reduction in occupancy, resulting in a 5%
discount in the model; (iv) prospects for a lengthy holding period
(which arises from the lack of recent offers and the General Partner's
intentions to hold the property, resulting in a 2.5% discount in the
model), and; (v) high general administrative costs. The Valuations
Group, applying the fractional interest discount approach derived a
value of $419 per Interest which represents a net 51.25% discount from
a net asset value.
The Valuations Group also analyzed the recent tender offer price
as compared to the derived net asset value in eight partnerships and
concluded that each such offer was at a discount to net asset value,
with an average discount of 57.4%. The eight partnership tender
offers which The Valuations Group reviewed and the discounts were:
McNeil Pacific Investors Fund 1972 (57.6%), McNeil Real Estate Fund
IX, Ltd. (46.3%), McNeil Real Estate Fund X, Ltd. (60.1%), McNeil Real
Estate Fund XI, Ltd. (56.0%), McNeil Real Estate Fund XIV, Ltd.
(51.8%), McNeil Real Estate Fund XX, L.P. (67.0%), McNeil Real Estate
Fund XXIV, L.P. (72.8%), McNeil Real Estate Fund XXV, L.P. (47.8%).
The Partnership's Offer represents a discount of 6.8%.
These analyses, taken as a whole, led The Valuations Group to
conclude that the Offer Price of $800.00 per Interest would be fair to
Limited Partners from a financial point of view. The preparation of a
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 analyses 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 agreed to pay The
Valuations Group a fee of $7,000, whether or not the Offer is
consummated.
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 set forth in the Amended and Restated
Agreement of Limited Partnership, dated August 11, 1987 (the
"Partnership Agreement"). The Partnership Agreement permits the
General Partner to recover a general partner residual priority payment
and for payments of 10% 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 Keierleber, an affiliate of the General Partner, owns
12.58 Interests and has advised the General Partner that he does not
intend to tender his Interests. As a consequence of this Offer, Mr.
Keierleber will acquire a greater percentage ownership of the
Partnership, as will other Limited Partners who retain their
Interests, and be subject to the risks and benefits associated with
ownership of the Interests and the business of the Partnership.
An affiliate of the General Partner will continue to manage the
Partnership's property and receive property management fees from the
Partnership until the property is sold. The General Partner will
continue to manage the Partnership and receive partnership management
fees, subject to the limitations set forth in the Partnership
Agreement.
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 in several other respects.
The Partnership will use some or all of its existing cash
reserves 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. Moreover, if the
Partnership borrows additional funds to finance the purchase of in
excess of 1,313 Interests, such additional borrowing will increase the
required debt service of the Partnership and reduce, eliminate, or
result in a negative cash flow. The Partnership has not sought or
obtained a commitment for financing and there can be no assurances as
to the availability, terms, or applicable conditions of any financing.
The receipt of cash pursuant to the Offer will be a taxable
transaction to any Limited Partners who tender Interests. See "The
Partnership--Certain Federal Income Tax Consequences of the Offer."
If there are fewer than 300 remaining Limited Partners after
completion of this Offer, the Partnership intends to apply to
terminate the registration of the Interests under the Exchange Act.
The termination of registration of the Interests under the Exchange
Act is expected to reduce certain of the Partnership's administrative
costs, such as legal, accounting, printing, mailing and investor
communications expenses, and will reduce the information required to
be furnished by the Partnership to the Securities and Exchange
Commission and will 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.
Conduct of the Partnership After the Offer
The Partnership intends to operate The Meadows I for a number of
years. There can, of course, be no assurance that the market will be
better or worse than presently exists at any point in the future or
that a profit will be realized by the Partnership upon an eventual
sale of its property. The General Partner has no plans to seek a sale
of the Partnership's property until, in its opinion, such sale is
necessary or appropriate. The timing of such events cannot be
predicted, but the General Partner does not anticipate such a sale for
at least two years, and perhaps much longer. Other than as described
in this Offer, the Partnership does not have any present plans or
proposals that would result in any extraordinary transactions, or any
material changes in the structure of the Partnership.
If the Partnership obtains financing to fund this Offer, the
amount and frequency of future cash distributions will be affected by
any debt service obligations and possibly by the terms of the
financing arrangement. See "Distributions." The Partnership may
consider acquiring additional investment properties and leverage the
Partnership. No specific properties have been identified for
investment, and the General Partner will have substantial discretion
in investing any funds from refinancing of the Partnership property.
No assurances can be given that the Partnership will be successful in
obtaining suitable investments on financially attractive terms or
that, if investments are made, the objectives of the Partnership will
be achieved.
Upon completion of the Offer, the Partnership may consider
purchasing any Interests not purchased in the Offer. Any such
purchases may be on the same terms or on terms which are more or less
favorable to Limited Partners than the terms of the Offer. Rule 13e-4
under the Exchange Act prohibits the Partnership and its affiliates
from purchasing any Interests, other than pursuant to the Offer, until
at least ten business days after the Expiration Date. Any possible
future purchases by the Partnership will depend on many factors,
including the market price of the Interests, the results of the Offer,
the Partnership's business and financial position and general economic
and market conditions.
Interests the Partnership acquires pursuant to the Offer will not
be available for the Partnership to issue without further Limited
Partner action.
Certain Federal Income Tax Consequences of the Offer
The following is a general summary under currently applicable law
of certain federal income tax considerations generally applicable to
the sale of Interests pursuant to the Offer and the retention of
Interests after the Expiration Date. The following summary is for
general information only, and the tax treatment described herein may
vary depending upon each Limited Partner'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. In addition, the summary does not address the
federal income tax consequences to all categories of Interest
holders, nor does it address the federal income tax consequences to
persons who do not hold the Interests as capital assets, as defined
by the Internal Revenue Code of 1986, as amended (the "Code"). No
ruling from the Internal Revenue Service ("IRS") will be sought with
respect to the federal income tax consequences discussed herein; thus,
there can be no assurance that the IRS will agree with the conclusions
stated. Limited Partners are urged to consult their own tax advisors
as to the particular tax consequences of a tender of their Interests
to the Partnership for repurchase 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. 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.
Sale of Interests Pursuant to the Offer. The receipt of cash 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 repurchase of
Interests by the Partnership pursuant to the Offer will be deemed a
sale of the Interests by the tendering Limited Partner. The
Partnership's payment for a Limited Partner's Interests is in complete
liquidation of that portion of the Limited Partner's interest in the
Partnership represented by the repurchased Interests. The recipient
of such payments is taxable to the extent of any gain recognized in
connection with the liquidation. In general, and subject to the
recapture rules of the Code Section 751 discussed below, a holder will
recognize capital gain or loss at the time his Interests are purchased
by the Partnership to the extent that the money distributed to him
exceeds his adjusted basis the repurchased Interests. Upon a sale of
an Interest pursuant to the Offer, a Limited Partner will be deemed to
have received money in the form of any cash payments to him from the
Partnership and to the extent he is relieved from his proportionate
share of 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 to the Partnership 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 nonrecourse liabilities (if any), exceeds the adjusted
basis of the Limited Partner for the repurchased Interests. The
income taxes payable upon the sale must be determined by each Limited
Partner on the basis of his own financial interests.
The adjusted 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 nonrecourse liabilities,
if any, 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 cash distributions and by the share of Partnership losses
allocated to the Limited Partner.
A selling Limited Partner will be allocated a pro rata share of
the Partnership's taxable income or loss for 1995 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 Partner'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. Because of the
lawsuit recovery ("Recovery"), it is likely that the allocation of
Partnership income for 1995 will result in an increase in basis and a
corresponding reduction in taxable gain. For individuals, trusts and
estates the income allocated will be treated as ordinary income which
could be taxed at a rate as high as 39.6% for federal income tax
purposes, while the corresponding reduction in taxable gain will
result in tax savings of no more than 28% of the reduction in taxable
gain.
There is no nonrecourse debt attributed to the Interests as of
the date of the Offer. Therefore, in determining the tax consequences
of accepting the Offer, the Partnership's payments for Interests will
be deemed to be equal to the $800 cash payment per Interest (the
"Selling Price"). The taxable gain (or loss) to be incurred as a
consequence of accepting the Offer is determined by subtracting the
adjusted basis of the purchased Interests from the Selling Price.
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 by the day admitted to the
Partnership. As of September 30, 1995, the General Partner estimates
that the adjusted tax basis of each Interest held by an original
Limited Partner ranges from $970 to $975, on average, depending upon
the year of investment, computed as follows:
1988 1989
Purchase Purchase
Original Capital Contribution $1,000 $1,000
Interest Income Reported (through December 31, 1994) 99 65
Estimated 1995 Rental and Recovery Income 246 246
Estimated 1995 Interest Income 17 17
$1,362 $1,328
Less: Net Tax Losses (through December 31, 1994) (128) (112)
Less: Cash Distributions (through December 31, 1994) (264) (241)
Estimated Current Basis Per Interest $ 970 $ 975
The foregoing estimate includes estimates of the allocated
portions of items attributable to 1995 (including interest income, the
Recovery income, and passive activity losses).
Under the foregoing and utilizing the estimated adjusted tax
basis, an original Limited Partner whose Interests are purchased in
the Offer would incur a loss for federal income tax purposes of about
$170 to $175 per Interest (on average) as follows:
1988 1989
Purchase Purchase
Cash for Interests (Selling Price) $ 800 $ 800
Subtract Basis (computed above) (970) (975)
Taxable gain (loss) $(170) $(175)
Such a loss will be a capital loss if the Interests are a capital
asset in the hands of the current Limited Partner. Capital losses are
deductible only to the extent of 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.
The actual taxable gain (loss) for any particular Limited Partner
may vary depending on that Limited Partner's particular circumstances.
For example, if a current Limited Partner acquired an Interest from
another Limited Partner rather than in the initial offering of
Interests, the current Limited Partner's basis for his Interests is
probably not between $970 to $975 (the amounts shown above).
Furthermore, if the Limited Partner has suspended passive activity
losses from this Partnership or from any other activity, the Limited
Partner may be able to offset the income allocated to him by the
Partnership for 1995 by the amount of his suspended passive activity
losses. The General Partner estimates that the amount of suspended
passive activity losses from this Partnership would range from $106 to
$116 per Interest, unless such losses have previously been utilized by
the Limited Partner.
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 not offset such losses
against so-called "portfolio" 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 from that year, and a gain, if any,
recognized by a Limited Partner upon such sale can be offset by such
Limited Partner's current or carryover passive activity losses, if
any, from the Partnership or from other sources. If a Limited Partner
disposes of 100% of his Interests pursuant to the Offer, such Limited
Partner generally will be able to deduct his remaining passive
activity losses, if any, from the Partnership that could not
previously be deducted by such Limited Partner due to the foregoing
limitations.
A taxable gain, if any, 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 if (1) he or she is not a "dealer" in securities; (2) he or
she has held the Interests for longer than 12 months; and (3) the
Partnership has no Section 751 assets. To the extent that a portion
of the gain realized on the sale of an Interest is attributable to
Section 751 assets (i.e., "unrealized receivables" and "inventory
items of the Partnership which have appreciated substantially in
value") a Limited Partner will recognize ordinary income, and not a
capital gain, upon the sale of the Interest. For purposes of Code
Section 751, recapturable cost recovery allowance is treated as if it
were an "unrealized receivable." Thus, a Limited Partner who sells an
Interest will recognize ordinary income in an amount not in excess of
his share of the Partnership's recapturable cost recovery allowance.
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 of the Partnership
which have appreciated substantially in value" for purposes of Code
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 the Partnership a "dealer" for tax
purposes.
The amount of recapturable cost recovery allowance per Interest
purchased by a Limited Partner in the original offering was $11 as of
December 31, 1994. Therefore, approximately $11 of the taxable gain,
if any per Interest will be considered to be ordinary income, with the
balance of the taxable gain considered to be capital gain for federal
income tax purposes for the Limited Partners who hold their Interests
as capital assets. Ordinary income recognized in 1995 is taxed at a
maximum effective rate of 39.6% for federal income tax purposes. Net
capital gains are taxed for federal income tax purposes at a stated
maximum rate of 28% (which may actually be somewhat higher, depending
on the taxpayer's personal exemptions and amount of adjusted gross
income).
Gain realized by a foreign Limited Partner on a sale of Interests
pursuant to this Offer will be subject to federal income tax. Under
Code Section 1445(c) and related regulations, the transferee of a
partnership interest held by a foreign person is generally required to
deduct and withhold a tax equal to 10% of the amount realized on the
disposition. The Partnership will withhold 10% of the amount realized
by 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 Service by filing a U.S. income tax return.
To prevent back-up federal income tax withholding equal to 31% 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 provide certain other information
by completing a Substitute Form W-9 to 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 "The Offer -- Signature Guarantees
and Method of Delivery."
The Recovery. The General Partner believes that it has properly
allocated the Recovery between taxable income and the recovery of
nondeductible expenses and that the taxable portion of the Recovery is
properly allocable to the current year. Because of the inherently
factual nature of these issues concerning the Recovery, no assurance
that the Service will respect these allocations or as to their
eventual treatment if challenged, can be given as to the outcome of
any contest. Because of the Recovery, a Limited Partner, whether or
not tendering any Interest, will be allocated approximately $277 of
Recovery Income per Interest. Depending upon the personal tax
situation, Limited Partners may have to pay income tax on their share
of income arising from the Recovery.
Retirement Plan Investors. Qualified pension, profit-sharing and
stock bonus plans and IRA's (collectively "Qualified Plans") are
generally exempt from taxation except to the extent that their
unrelated business taxable income ("UBTI"), determined in accordance
with Code Sections 511-514, exceeds $1,000 in any taxable year. Code
Section 512(b)(5) provides that UBTI does not include gains or losses
from the disposition of property other than inventory or property held
primarily for sale to customers in the ordinary course of business.
If a Qualified Plan is not a "dealer" in securities, any gain 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
the Partnership's business had 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 nonredeeming Limited Partner has acquired an
interest in debt-financed property. Such treatment could result in
some portion of the Partnership's income allocated to those Limited
Partners that are Qualified Plans.
Retention of Interests. There will be no immediate tax
consequences to Limited Partners with respect to Interests that are
not repurchased in the Offer. However, Limited Partners who retain
their Interests will, henceforth, have a proportionately greater
interest in the items of Partnership income and loss and in
distributions by the Partnership because each remaining Interest will
represent a greater percentage of the total Interests outstanding.
The extent of the change in proportionate interest will depend upon
the number of Interests tendered and accepted by the Partnership.
Limited Partners who own Interests that are not repurchased will
have income or loss allocated to them by the Partnership for 1995
(estimated to be approximately $263 of net income per Interest as of
September 30, 1995). However, such Limited Partners will not receive
any cash distributions from the Partnership in 1995 that can be used
to pay the 1995 income taxes resulting from such allocation. As
discussed above, suspended passive activity losses, if any, can be
used to reduce the impact of the taxable income allocated for 1995.
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.
Accounting Treatment
For accounting and financial purposes, the Offer will be
accounted for as a redemption of limited partnership interests in
accordance with Accounting Principles Board Opinion No. 16.
Regulatory Matters
Except as set forth in this Section of the Offer, the Partnership
is not aware of any filings, approvals or other actions by any
domestic or foreign governmental or administrative agency that would
be required prior to the repurchase of Interests by the Partnership
pursuant to this Offer. The Interests are not "margin securities"
under the regulations of the Board of Governors of the Federal Reserve
System and, accordingly, such regulations are not applicable to this
Offer.
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 Commissioner 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
Commissioner 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. The Partnership has made
the required filing under Section SEC 6.05 and on November 8, 1995,
the Staff of the Wisconsin Commissioner of Securities informed the
Partnership that it will not recommend that an order disallowing the
tender offer be issued. The Wisconsin Commissioner of Securities has
not passed upon the merits of the Offer or made any finding concerning
its fairness.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
WISCONSIN COMMISSIONER OF SECURITIES NOR HAS THE COMMISSIONER PASSED
UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY
OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT.
THE OFFER
Under the terms of the Offer, the Partnership will pay for
Interests validly tendered on or prior to the Expiration Date and not
withdrawn in accordance with the Offer to Purchase. The term
"Expiration Date" shall mean 12:00 p.m., midnight, Milwaukee time, on
December 21, 1995, unless the Partnership extends this Offer and, in
such event, the term "Expiration Date" shall mean the latest time and
date on which the Offer, as so extended, shall expire.
If, prior to the Expiration Date, the Partnership were to
increase the Offer Price, such increased Offer Price would be
delivered in respect of all Interests accepted pursuant to this Offer,
whether or not they were tendered prior to such increase.
This Offer is not conditioned on any minimum number of Interests
being tendered. This Offer is, however, subject to satisfaction of
certain conditions. See "The Offer--Conditions of Offer," which sets
forth in full the conditions of this Offer. The General Partner
reserves the right, in its sole discretion, to waive any or all of
such conditions, but shall not be obligated to do so.
This Offer to Purchase and the related Letter of Acceptance are
being mailed by the Partnership to Limited Partners of record (in the
case of Individual Retirement Accounts and qualified plans a copy will
be sent to the beneficial owners).
There are no appraisal rights or other rights accorded to
nontendering Limited Partners under either the Partnership Agreement
or applicable state law.
Proration
This Offer is for all Interests and upon the terms and subject to
the conditions of the Offer, the Partnership will accept for payment
(and thereby purchase) up to all Interests. The proration period also
expires on the Expiration Date.
In the event that more than 1,313 Interests are tendered by the
Expiration Date, the Partnership will attempt to borrow additional
funds on terms deemed acceptable by the General Partner, in its sole
discretion, to enable the Partnership to purchase up to 4,751.16
Interests. The maximum mortgage indebtedness permitted by Section 7.2
of the Partnership Agreement is 80% of the fair market value of any
property. There can be no assurance that the Partnership will obtain
such financing.
In the event that more than 1,313 Interests are tendered by the
Expiration Date and the Partnership does not have sufficient funds to
purchase all of the Interests tendered by that date, the Partnership
will prorate purchases from the Limited Partners as follows:
1. The Partnership will first accept all of the tenders from
Limited Partners who own less than 100 Interests and who tender all of their
Interests by the Expiration Date. If this amount is in excess of 1,313
and the Partnership does not, or cannot borrow additional funds, the
Partnership will prorate purchases based upon the ratio of (a) the number
of Interests tendered by each Limited Partner who own less than 100 Interests
and tendered all of their Interests to (b) the total number of Interests
tendered by all Limited Partners who own less 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 less than three Interests.
2. If the above category of tendering Limited Partners has been
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 more than 100 Interests and (ii) Limited Partners
who own less 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 Interests. 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 Interests. See "The Offer--Procedures for
Tendering Interests."
If the Partnership increases or decreases the price to be paid
for Interests, or the Partnership increases 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 Partnership
decreases the number of Interests being bought, and the Offer is
scheduled to expire less 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 "business 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, Milwaukee time. If the Partnership
obtains financing, it will prepare and disseminate supplemental
material and, if necessary, may extend the Expiration Date.
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 Partnership 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, 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 Partnership expects
to forward cash to the Limited Partners who tender Interests within 30
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
Partnership for payment will constitute a binding agreement between
the tendering Limited Partner and the Partnership 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 PARTNERSHIP. OVERNIGHT COURIER SERVICE OR REGISTERED
MAIL IS RECOMMENDED.
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 "Eligible
Institution"). In all other cases, all signatures on the Letter of
Acceptance must be guaranteed by an appropriate institution. See
Instruction 1 of 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 Partnership 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 General Partner, in its sole discretion, which determination
shall be final and binding on all parties. The Partnership reserves
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 Partnership
also reserves 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
Partnership is 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.
Withdrawal Rights. Except as provided in this section, the
tender of Interests pursuant to the Offer is irrevocable. Interests
tendered pursuant to the Offer may be withdrawn at any time before the
Expiration Date and, unless theretofore accepted for payment by the
Partnership, may also be withdrawn after 12:00 midnight, Milwaukee
time, on December 21, 1995.
For a withdrawal to be effective, the Partnership must timely
receive at its offices a written, telegraphic or facsimile
transmission notice of withdrawal. Such notice of withdrawal must
specify the name of the person having tendered the Interests to be
withdrawn and the number of Interests to be withdrawn and the name of
the registered holder, if different from that of the person who
tendered the Interests. All questions as to the form, validity and
eligibility (including time of receipt) of notices of withdrawal will
be determined by the Partnership, in its sole discretion, which
determination shall be final and binding on all parties. The
Partnership is not and will not be obligated to give any notice of any
defects or irregularities in any notice of withdrawal, and will not
incur any liability for failure to give any such notice. Any
Interests properly withdrawn will thereafter be deemed not tendered
for purposes of the Offer. Withdrawn Interests may, however, be
retendered before the Expiration Date by again following the
procedures set forth in this Offer.
Certain Conditions
The Offer is subject to certain conditions specified in The Offer
to Purchase, including the proration terms. Notwithstanding any other
provision of the Offer, the Partnership shall not be required to
accept for payment, purchase or pay for any Interests tendered, and
may terminate or amend the Offer, or may postpone the acceptance for
payment of, or the payment for, Interests tendered, if at any time on
or after the date of the Offer, and at or before the time of purchase
of, or payment for, any such Interests, any of the following events
shall have occurred (or shall have been determined by the Partnership
to have occurred) which, in the Partnership's reasonable judgment in
any such case and regardless of the circumstances (including any
action or omission to act by the Partnership), makes it inadvisable to
proceed with the Offer or with such acceptance for purchase or
payment:
(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 or governmental, regulatory or administrative
authority or agency or tribunal, domestic or foreign, which:
(1) challenges the making of the Offer, or the acquisition
of Interests pursuant to the Offer or otherwise relates
in any manner to the Offer; or
(2) in the Partnership's reasonable judgment, could 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 or
materially impair the Offer's contemplated benefits to
the Partnership; or
(b) There shall have been any action threatened, pending or
taken, or approval withheld, 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 court or any government or governmental,
regulatory or administrative authority or agency or
tribunal, domestic or foreign, which, in the Partnership's
reasonable judgment, could directly or indirectly:
(1) 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;
(2) delay or restrict the ability of the Partnership, or
render the Partnership unable, to accept for payment or
pay for some or all of the Interests;
(3) materially impair the contemplated benefits of the
Offer to the Partnership; or
(4) 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; or
(c) There shall have occurred:
(1) the declaration of any banking moratorium or suspension
of payments in respect of banks in the United States;
(2) any general suspension of trading in, or limitation on
prices for, securities on any United States national
securities exchange or in the over-the-counter market;
(3) the commencement of a war, armed hostilities or any
other national or international crisis directly or
indirectly involving the United States;
(4) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or
authority on, or any event which, in the Partnership's
reasonable judgment, might affect, the extension of credit by
banks or other lending institutions in the United
States;
(5) any change in the general political, market, economic
or financial conditions in the United States or abroad
that could have a material adverse effect on the
Partnership's business, operations or prospects; or
(6) in the case of any of the foregoing existing at the
time of the commencement of the Offer, in the Partner-
ship's reasonable judgment, a material acceleration or
worsening thereof; or
(d) Any change shall occur or be threatened in the business,
condition (financial or other), income, operations,
Interests ownership or prospects of the Partnership which,
in the Partnership's reasonable judgment, is or may be material
to the Partnership or its Limited Partners; or
(e) A tender or exchange offer for any or all of the Interests
(other than the Offer), or any merger, business combination
or other similar transaction with or involving the
Partnership, shall have been proposed, announced or made by
any person; or
(f) If (i) any entity, "group" (as that term is used in Section
13(d)(3) of the Exchange Act) or person shall have acquired
or proposed to acquire beneficial ownership of more than 5%
of the outstanding Interests, or (ii) such entity, group or
person that has publicly disclosed any such beneficial
ownership of more than 5% of the Interests prior to such
date shall have acquired, or proposed to acquire, beneficial
ownership of additional Interests constituting more than 2%
of the outstanding Interests or shall have been granted any
option or right to acquire beneficial ownership of more than
2% of the outstanding Interests.
The foregoing conditions are for the Partnership's benefit and
may be asserted by the General Partner regardless of the circumstances
giving rise to any such condition (including any action or inaction by
the Partnership or General Partner) or may be waived by the
Partnership, in whole or in part. The Partnership's failure 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 Partnership concerning the events described
in this Section shall be final and binding upon all parties. In all
of the foregoing, the General Partner has conclusive authority to act
for the Partnership.
Estimated Costs and Fees
Estimated costs and fees in connection with the Offer and the
related transactions, which have been or will be paid by the
Partnership, are as follows:
Advisory fees . . . . . . . . . . . . . . . . $ 7,000
Property appraisal . . . . . . . . . . . . . . 2,400
Legal fees . . . . . . . . . . . . . . . . . . 55,000
Blue Sky fees and expenses . . . . . . . . . . 5,000
Accounting fees . . . . . . . . . . . . . . . 10,000
Printing, mailing fees, and EDGAR filing fees 20,000
Commission filing fees . . . . . . . . . . . . 760
Miscellaneous . . . . . . . . . . . . . . . . 9,840
Total . . . . . . . . . . . . . . . . . $110,000
In connection with the Offer, the Partnership may utilize the
services of the Partnership manager, and certain other employees of
Decade Companies, or its affiliates. None of such persons will
receive any compensation from the Partnership in connection with their
services with respect to the Offer, other than the General Partner
and/or its affiliates may be reimbursed at customary rates for time
devoted by such person.
The Partnership will not pay fees or commissions to any broker,
dealer, commercial bank, trust company or other person for soliciting
any Interests pursuant to the Offer. The Partnership will, however,
reimburse such persons for customary handling and mailing expenses
incurred in forwarding materials in respect of the Offer to the
beneficial owners for which they act as nominees. No such broker,
dealer, commercial bank or trust company has been authorized to act as
the Partnership's agent for purposes of this Offer.
FINANCING THE OFFER
General
If the Partnership purchases 1,313 or fewer Interests pursuant to
the Offer at a Purchase Price of $800 per Interest, the Partnership
anticipates that all required funds will be obtained from available
cash on hand of the Partnership. Repurchase of additional Interests,
if any, would need to be funded by Partnership borrowing. At the date
of this Offer, the Partnership has not sought or received any
commitment for financing and there can be no assurance that such
financing could be arranged on terms deemed satisfactory to the
Partnership. See "Pro Forma Financial Information" for further
information concerning the assumed cost of funds for the Offer. The
actual amount of any funds borrowed would depend upon the results of
this Offer, the interest rate of the borrowings, 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.
Bank Financing
If the Partnership were to obtain financing, it would likely be
pursuant to a mortgage loan on The Meadows I. The General Partner has
not sought or received a commitment for any financing, but based upon
its past experience believes that it may be possible for the
Partnership to obtain mortgage financing. If more than 1,313
Interests are tendered, the Partnership intends to determine whether
it can obtain financing on acceptable terms. There can be no assurance
that financing will be available on acceptable terms and the
Partnership may enter into interim financing to fund this Offer. To
the extent the Partnership acquires indebtedness, a Limited Partner's
retained Interests will be subject to increased risks. In the event
of the financing constituting acquisition indebtedness under Code
Section 514(c), there may be unfavorable UBTI tax consequences for
certain retirement plan investors who retain their Interests. See
"The Partnership--Certain Federal Income Tax Consequences of the
Offer." The Partnership intends to repay any amounts borrowed from
cash flow from the Partnership's operations.
DESCRIPTION OF THE LIMITED PARTNERSHIP INTERESTS
As of September 30, 1995, the Partnership had 4,751.16 Interests
outstanding held by 616 Limited Partners. The Partnership Agreement
authorized the issuance of a maximum of 20,000 interests through a
public offering for a total potential Limited Partner investment of
$20,000,000. At the option of the General Partner, the maximum number
of Interests to be sold could be increased to 30,000, aggregating a
total investment of $30,000,000.
BUSINESS OF THE PARTNERSHIP
Since January 1989, the Partnership has been engaged solely in
the business of investing in and operating residential apartment
project in Madison, Wisconsin known as The Meadows I. The business
of the Partnership is not seasonal, although the Partnership's
property may experience cyclical fluctuations in occupancy levels in
the rental market where the apartments are located.
The Partnership does not have any employees. The Meadows I is
managed by Decade Properties, Inc., an affiliate of the General
Partner. Employees of Decade Properties, Inc. perform the on-site
management services required to operate and maintain The Meadows I.
Employees of the General Partner render partnership management
services to the Partnership such as maintaining investor
communications, compliance with tax laws and other governmental
regulations, and cash management.
The Partnership is not dependent upon any single tenant or small
groups of tenants for its operating success. The loss of any one of
or small group of tenants would not have a material adverse effect.
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 holding, may be affected by many factors over which
the Partnership has limited or no control, among them 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. The real estate
investment business is highly competitive. Additional residential
rental projects may be built which may compete directly with The
Meadows I. At the present time, the Partnership conducts its real
estate operations solely in the Madison, Wisconsin rental market. The
Partnership competes with numerous other entities involved in real
estate investment, including limited partnerships formed or to be
formed by the General Partner. Many of these competitors may have
greater assets than those of the Partnership or may be associated with
individuals with broader experience than that of the General Partner.
In addition, demand for investment properties of the type owned by the
Partnership may increase or decrease. This competition is primarily
based on property location, condition, and asking rent. These factors
may increase or decrease the price of potential property
acquisitions/sales.
The Meadows I, the residential apartment complex owned and
operated by the Partnership, is located at 201-245 Swanton Road,
Madison, Wisconsin 53714, and was acquired by the Partnership in
January, 1989. It is not pledged as collateral against any mortgage
of other encumbrance.
The Meadows Apartment Complex consists of 404 apartment units in
32 two-story buildings covering approximately 24 acres of land. The
property was developed in four phases; between 1976 and 1980. On
January 17, 1989, the Partnership acquired one of the four phases
comprising 88 of the 404 rental units, which is The Meadows I. The
other 316 rental units were acquired by, and are operated by, an
affiliated limited partnership (Decade Companies Income Properties).
The apartments in Phase I were completed in 1976 and consist of one
and two-bedroom units in eight buildings. The entire complex has a
total of 720 parking spaces for a 1.78 to 1 ratio of stalls per unit.
In addition to the apartment units, the apartments owned by the
Partnership features one swimming pool and a play area. Laundry room
areas and storage lockers are located in the basement of each
building.
The Meadows I, situated on approximately 4.665 acres, is located
at the southeast corner of the intersection of I-90/94 and Highway 30.
The property is in a growing residential neighborhood five miles
northeast of Madison's Capitol Square. The primary access route is
Highway 30 and East Washington Avenue. North-south linkages are
provided by I-90/94 and Highway 51. Schenk Elementary School is about
one-half mile southwest of the property. Public bus transportation is
convenient with two bus stops servicing the property's residents. The
expansion of commercial development on major arterials west of the
neighborhood increases the desirability of the project's location.
The Partnershp's tax basis is as follows:
Building Furniture and
Equipment
Cost $2,383,527 $200,957
Accumulated (588,552) (154,436)
Depreciation
Adjusted Tax $1,794,975 $ 46,521
Basis
The Partnership's property is being depreciated using MACRS
straightline over 27.5 years, and the furniture and equipment is being
depreciated using MACRS 200% declining balance over 7 years. Meadows
I is taxed at a $32.9764 mill rate levy for 1994 (after consideration
of major state aids) and paid annual realty tax of $69,250.
The apartment mix and monthly asking rents at The Meadows I is as
follows:
Asking Rent
Number Square
Style of Units Feet 12/94 12/93 12/92
One-bedroom/one 24 625 $505-515 $495-510 $470-495
bath
Two-bedroom/one 64 875 $585-605 $570-590 $570-590
bath __
88
As of the date of this Offer, there are approximately 83 leases
in effect, which generally are 12 months in duration. No tenant
occupies 10% or more of the property. The occupancy rate expressed as
a percentage for the past years is as follows:
1994 1993 1992 1991 1990
Occupancy Rate 87.74% 90.39% 91.38% 97.42% 89.20%
The average annual rental rate per Unit is computed as follows:
1994 1993 1992 1991 1990
Rental Income $496,351 $505,918 $496,653 $510,076 $437,985
Number of
Apartment Units 88 88 88 88 88
Average
Effective Annual
Rent Per Unit 5,640 5,749 5,644 5,796 4,977
To the General Partner's best knowledge, no environmental hazards
exists at The Meadows I. Presence of toxic waste or any other
hazardous substances is not suspected from observation nor has any
been discovered and the General Partner is not aware of any
underground storage tanks. The General Partner is not aware of any
incidents of spills, dumping or discharges at the property or the
presence of hazardous substances. The General Partner is not aware of
any groundwater contamination, underground methane gas or radon gas.
The General Partner believes that The Meadows I is not producing air
emissions or waste water of environmental concern. However, given the
age of The Meadows I, it is possible that asbestos-containing
materials were used in the construction of the property, including
floor tiles and roof shingles. A Phase I Environmental Site
Assessment has not been performed on the property. The fairness
opinion of The Valuations Group and the value estimate provided by the
appraiser assumes that no environmental problems exist.
LACK OF MARKET AND DISTRIBUTIONS
To the knowledge of the General Partner, there is no market for
Interests and the Interests are not traded on any registered
securities exchange or the NASDAQ over the counter market and none is
expected to develop. The following table sets forth the cash
distributions declared per Interest for the fiscal periods indicated:
Cash Distributions Declared Per Interest
1993
1st Quarter . . . . . . . . $12.50
2nd Quarter . . . . . . . . $12.50
3rd Quarter . . . . . . . . $12.50
4th Quarter . . . . . . . . $12.50
1994
1st Quarter . . . . . . . . $12.50
2nd Quarter . . . . . . . . $12.50
3rd Quarter . . . . . . . . $0
4th Quarter . . . . . . . . $0
1995
1st Quarter . . . . . . . . $0
2nd Quarter . . . . . . . . $0
3rd Quarter . . . . . . . . $0
The Partnership paid consecutive monthly cash distributions to
Limited Partners during its first three years of operation from June
1988 through June 1991. Cash distributions were then suspended for
six quarters to accumulate funds necessary for the litigation against
the Partnership's former attorneys and their malpractice insurer.
Cash distributions were resumed for six quarters beginning with the
first quarter of 1993 through June 1994. Cash distributions were
again suspended beginning with the quarter ended September 1994 to pay
expenses associated with the lawsuit and to accumulate funds to make
this Offer. The amount and frequency of cash distributions in the
future will depend on circumstances existing at the time. However,
such cash distributions would be negatively affected by the amount of
any required debt service, as well as the administrative costs
associated with the reporting requirements under the federal
securities laws, if applicable.
SECURITY OWNERSHIP OF THE GENERAL PARTNER
As of September 30, 1995, Jeffrey Keierleber, an affiliate of the
General Partner, owns 12.58 Interests of the Partnership (0.265% of
the outstanding Interests). Mr. Keierleber does not intend to tender
his Interests pursuant to the Offer. If the Partnership repurchases
1,313 Interests (or approximately 28% of the Interests outstanding at
the date of the Offer) pursuant to the Offer, and Mr. Keierleber does
not tender his Interests pursuant to the Offer, he would continue to
own less than 1% of the outstanding Interests.
Based upon the Partnership's records and upon information
provided to the Partnership by its General Partner, Partnership
Manager, and affiliates, neither the Partnership nor, to the best of
the Partnership's knowledge, any of the general partners of the
General Partner or Partnership Manager of the Partnership, nor any
associates of any of the foregoing, has effected any transactions in
the Interests during the 60 business day period prior to the date
hereof.
Except as set forth in this Offer neither the Partnership nor, to
the best of the Partnership's knowledge, any of its affiliates,
General Partner or the Partnership Manager is a party to any contract,
arrangement, understanding or relationship with any other person
relating, directly or indirectly, to the Offer with respect to any
securities of the Partnership (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies, consents or
authorizations).
SUMMARY HISTORICAL FINANCIAL INFORMATION
Certain information as to the financial operation of the
Partnership is contained herein. Limited Partners are urged to make
their own assessment of the value of their Interests.
Selected Statement of Operations Data:
Nine Months Ended
September 30 Year Ended December 31
1995 1994 1994 1993
(unaudited)
(in thousands of dollars, except per Interest
data)
Revenues associated $ 331 $ 398 $ 512 $ 523
with rental property
Income from rental 39 103 115 127
property operation
Net Income (Loss) 1,281 (444) (351) (35)
Per Limited Partner
Interest Data:
Net Income (Loss) 256 (89) (70) (7)
Cash distributions 0 25 25 50
declared
Average Limited 4,751.16 4,751.16 4,751.16 4,751.16
Partnership
Interests
Outstanding
Ratio of earnings to 79.19 N/A N/A N/A
combined fixed
charges
Selected Balance
Sheet Data:
September 30 December 31
1995 1994 1994 1993
(unaudited)
(in thousands of dollars, except for per
Interest data)
Working Capital $ 1,680 $ (21) $ 96 $ 467
Total Assets 4,097 2,536 2,591 3,115
Total Liabilities 602 512 476 528
Total Capital 3,496 2,024 2,115 2,587
Book value per 726 452 470 566
Interest
Certain matters that materially affect the comparability of the
information reflected in the selected financial data include the
fluctuating costs of litigation against the Partnership's former
attorneys and their malpractice insurer, the receipt in 1995 of proceeds
from settlement of the litigation of $1,486,900, and the suspension of
cash distributions to limited partners for two quarters in 1994 and
three quarters in 1995. The fluctuation in total assets also considers
depreciation on The Meadows I.
PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed statements of earnings
and condensed balance sheets (collectively, the "Pro Forma Statements")
were prepared to illustrate the estimated effects of the Offer as if the
Offer had occurred for consolidated statement of earnings presentation
purposes on January 1, 1994, or January 1, 1995, as the case may be and
for balance sheet presentation purposes on December 31, 1994, and
September 30, 1995, respectively.
The estimated transaction fees and expenses are provided solely for
the purpose of presenting the pro forma financial data set forth below.
The actual transaction fees and expenses may differ from the assumption
used.
The Pro Forma Financial data does not purport to represent what the
Partnership's financial position or results of operations would actually
have been if the Offer in fact had occurred at December 31, 1994, or
September 30, 1995, or if the Offer had occurred on January 1, 1994, or
January 1, 1995, as the case may be or to project the Partnership's
financial position or results of operations for any future date or
period.
The following financial information should be read in conjunction
with the audited consolidated financial statements and related notes
thereto included elsewhere in this Offer.
Decade's Monthly Income & Appreciation Fund
Pro Forma Balance Sheet (Unaudited)
(No Borrowing To Fund Offer)
December 31, September 30,
1994 1995 December 31, September 30,
Historical Historical Adjustments 1994 1995
Assets (Note A) (Note A) (Note B) Pro Forma Pro Forma
Rental property, at $3,077,304 $3,087,960 $3,077,304 $3,087,960
cost
Less accumulated (677,671) (753,171) (677,671) (753,171)
depreciation __________ __________ __________ __________
2,399,633 2,334,789 2,399,633 2,334,789
Cash and cash 191,012 1,762,362 $(1,160,400) (969,388) 601,962
equivalents
Prepaid expenses 745 73 745 73
__________ __________ __________ __________ __________
Total assets $2,591,390 $4,097,224 $(1,160,400) $1,430,990 $2,936,824
Liabilities
Tenant security $ 16,808 $ 21,483 $ 16,808 $ 21,483
deposits
Accounts payable 9,696 9,150 9,696 9,150
Other accrued expenses 69,250 52,200 69,250 52,200
Payable to affiliates 380,368 518,818 380,368 518,818
__________ __________ __________ __________ __________
Total Liabilities 476,122 601,651 0 476,122 601,651
General Partner (117,392) 45,926 0 (117,392) 45,926
(deficit)
Limited Partners 2,232,660 3,449,647 $(1,160,400) 1,072,260 2,289,247
__________ __________ __________ __________ __________
Total Capital and $2,591,390 $4,097,224 $(1,160,400) $1,430,990 $2,936,824
Liabilities
The foregoing unaudited Pro Forma Balance Sheet gives effect to certain
assumptions, including purchase by the Partnership of 1,313 Interests at
$800 per Interest pursuant to the Offer. The Pro Forma Balance Sheet gives
effect to the transaction as if it had occurred on December 31, 1994, and
September 30, 1995, respectively. 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, 1994, or September 30, 1995. The December
31, 1994, pro forma amounts do not reflect the Partnership's 1995 receipt
of $1,486,900 as a result of settling a pending lawsuit.
See notes to Pro Forma Financial Statements.
Decade's Monthly Income & Appreciation Fund
Pro Forma Balance Sheet (Unaudited)
(Borrowing $2 Million To Fund Offer)
December 31, September 30,
1994 1995 December 31, September 30,
Historical Historical Adjustments 1994 1995
Assets (Note A) (Note A) (Note B) Pro Forma Pro Forma
Rental property, at $3,077,304 $3,087,960 $3,077,304 $3,087,960
cost
Less accumulated (677,671) (753,171) (677,671) (753,171)
depreciation __________ __________ __________ __________ __________
2,399,633 2,334,789 2,399,633 2,334,789
Cash and cash 191,012 1,762,362 $(1,160,400) (969,388) 601,962
equivalents
Prepaid expenses 745 73 745 73
Loan financing costs 0 0 40,000 40,000 40,000
__________ __________ __________ __________ __________
Total assets $2,591,390 $4,097,224 $(1,120,400) $1,470,990 $2,976,824
Liabilities
Tenant security $ 16,808 $ 21,483 $ 16,808 $ 21,483
deposits
Accounts payable 9,696 9,150 9,696 9,150
Other accrued 69,250 52,200 69,250 52,200
expenses
Payable to affiliates 380,368 518,818 380,368 518,818
Mortgage loan 0 0 $2,000,000 2,000,000 2,000,000
__________ __________ __________ __________ __________
Total Liabilities 476,122 601,651 2,000,000 2,476,122 2,601,651
General Partner (117,392) 45,926 0 (117,392) 45,926
(deficit)
Limited Partners 2,232,660 3,449,647 (3,120,400) (887,740) 329,247
__________ __________ __________ __________ __________
Total Capital and $2,591,390 $4,097,224 $(1,120,400) $1,470,990 $2,976,824
Liabilities
The foregoing unaudited Pro Forma Balance Sheet gives effect to certain
assumptions, including purchase by the Partnership of 3,763 Interests at
$800 per Interest pursuant to the Offer. The Pro Forma Balance Sheet
gives effect to the transaction as if it had occurred on December 31,
1994, and September 30, 1995, respectively. 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, 1994, or September
30, 1995. The December 31, 1994, pro forma amounts do not reflect the
Partnership's 1995 receipt of $1,486,900 as a result of settling a
pending lawsuit.
See notes to Pro Forma Financial Statements.
Decade's Monthly Income & Appreciation Fund
Condensed Pro Forma Statement of Income
(No Borrowing to Fund Offer)
The following unaudited condensed Pro Forma Statement of Income and other
financial information for the year ended December 31, 1994, and nine months
ended September 30, 1995, gives effect to certain assumptions, including
the purchase by the Partnership of 1,313 Interests at $800 per Interest
pursuant to the Offer. The unaudited Pro Forma Statement of Operations
gives effect to this transaction as if it had occurred on January 1, 1994,
or January 1, 1995, as the case may be.
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,
1994, or January 1, 1995, as the case may be.
Nine Months
Ended Nine Months
December 31, September 30, Year Ended Ended
1994 1995 December 31, September 30,
Historical Historical Adjustments 1994 1995
(Note A) (Note A) (Note C) Pro Forma Pro Forma
Rental and service $ 511,649 $330,776 $ $ 511,649 $ 330,776
income
Operating expenses (295,247) (216,568) (295,247) (216,568)
__________ __________ __________ __________
Net Operating 216,402 $114,208 216,402 $ 114,208
Income
Other income and
(expenses)
Litigation settlement 1,387,641 1,387,641
Depreciation (101,514) (75,500) (101,514) (75,500)
Other expenses (453,511) (189,061) (453,511) (189,061)
Interest income 9,949 60,272 9,949 60,272
__________ __________ __________ __________
Net income (loss) (328,674) 1,297,560 (328,674) 1,297,560
before interest
Interest expense (21,850) (16,386) (21,850) (16,386)
__________ __________ __________ __________
Net Income (Loss) $ (350,524) $1,281,174 $ (350,424) $1,281,174
Earnings Per Interest
Net Income (Loss)
attributable to
limited partners
(95%) $(332,998) $1,217,115 $ 0 $(332,998) $1,217,115
Net Income (Loss) per (70.09) 256.17 (96.85) 354.00
Interest
Interests Outstanding 4,751.16 4,751.16 (1,313) 3,438.16 3,438.16
Ratio of Earnings to Fixed Charges
Earnings (loss) before $(328,674) $1,297,560 $(328,674) $1,297,560
interest expense
Fixed Charges 21,850 16,386 21,850 16,386
Ratio N/A 79.19 N/A 79.19
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 Financial Statements.
Decade's Monthly Income & Appreciation Fund
Condensed Pro Forma Statement of Income
(Borrowing $2 million)
The following unaudited condensed Pro Forma Statement of Income and other
financial information for the year ended December 31, 1994, and nine months
ended September 30, 1995, gives effect to certain assumptions, including
the purchase by the Partnership of 3,763 Interests at $800 per Interest
pursuant to the Offer. The unaudited Pro Forma Statement of Operations
gives effect to this transaction as if it has occurred on January 1, 1994,
or January 1, 1995, as the case may be.
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,
1994, or January 1, 1995, as the case may be.
Nine Months
Ended Nine Months
December 31, September 30, December 31, September 30, Year Ended Ended
1994 1995 1994 1995 December 31, September
Historical Historical Adjustments Adjustments 1994 30, 1995
(Note A) (Note A) (Note C) (Note C) Pro Forma Pro Forma
Rental and $ 511,649 $ 330,776 $ 0 $ 0 $ 511,649 $ 330,776
service income
Operating (295,247) (216,568) (295,247) (216,568)
expenses _________ _________ _________ _________ _________ _________
Net Operating 216,402 114,208 216,402 114,208
Income
Other income and
(expenses)
Litigation 1,387,641 1,387,641
settlement
Depreciation (101,514) (75,500) (101,514) (75,500)
Other expenses (453,511) (189,061) (453,511) (189,061)
Interest income 9,949 60,272 0 0 9,949 60,272
__________ __________ __________ __________ __________ __________
Net income (328,674) 1,297,560 0 0 (328,674) 1,297,560
(loss) before
interest
expense
Interest expense (21,850) (16,386) (170,000) (127,500) (191,850) (143,886)
__________ __________ __________ __________ __________ __________
Net Income $(350,524) $1,281,174 $ (170,000) $ (127,500) $(520,524) $1,153,674
(Loss)
Earnings Per Interest
Net Income
(Loss)
attributable to
limited
partners (95%) $(332,998) $1,217,175 $ (161,500) $ (121,500) $(494,498) $1,095,990
Net Income
(Loss) per
Interest (70.09) 256.17 (500.42) 1,109.12
Interests
Outstanding 4,751.16 4,751.16 (3,763) (3,763) 988.16 988.16
Ratio of Earnings to Fixed Charges
Earnings (loss) $(328,674) $1,297,560 $(328,674) $1,297,560
before interest
expense
Fixed Charges 21,850 16,386 191,850 143,886
Ratio N/A 79.19 N/A 9.02
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 Financial Statements.
Pro Forma Book Value of Limited Partner Interests (Unaudited)
(No Borrowing To Fund Repurchase Offer)
December 31, 1994, and September 30, 1995
December 31, September
1994 30, 1995 December 31, September 30,
Historical Historical Adjustments 1994 1995
(Note A) (Note A) (Note D) Pro Forma Pro Forma
Book value $2,232,660 $ 3,449,647 $(1,160,400) $1,072,260 $2,289,247
Number of limited 4,751.16 4,751.16 (1,313.00) 3,438.16 3,438.16
partner Interests
Book value per $ 469.92 $ 726.06 $ 883.78 $ 311.87 $ 665.83
limited partner
Interest
The foregoing unaudited pro forma financial information gives effect to
certain assumptions, including purchase by the Partnership of 1,313
Interests at $800 per Interest pursuant to the Offer. The unaudited Pro
Forma Book Value of Limited Partner Interests is derived from the unaudited
Pro Forma Balance Sheet which gives effect to the transaction as if it had
occurred on December 31, 1994, and September 30, 1995, respectively. The
Pro Forma Information should be read in conjunction with the historical
financial information of 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, 1994,
and September 30, 1995, respectively. The December 31, 1994, pro forma
amounts do not reflect the Partnership's 1995 receipt of $1,486,900 as a
result of settling a pending lawsuit.
See Notes to Pro Forma Financial Statements.
Decade's Monthly Income & Appreciation Fund
Pro Forma Book Value of Limited Partner Interests (Unaudited)
(Borrowing $2 Million To Fund Repurchase Offer)
December 31, 1994 and September 30, 1995
December September
31, 1994 30, 1995 December September
Historical Historical Adjustments 31, 1994 30, 1995
(Note A) (Note A) (Note D) Pro Forma Pro Forma
Book value $2,232,660 $3,449,647 $(3,120,400) $(887,740) $ 329,247
Number of limited 4,751.16 4,751.16 (3,763.00) 988.16 988.16
partner Interests
Book value per $ 469.92 $ 726.06 $ 829.23 $ (898.38) $ 333.19
limited partner
Interest
The foregoing unaudited pro forma financial information gives effect to
certain assumptions, including purchase by the Partnership of 3,763
Interests at $800 per Interest pursuant to the Offer. The unaudited Pro
Forma Book Value of Limited Partner Interests is derived from the unaudited
Pro Forma Balance Sheet which gives effect to the transaction as if it had
occurred on December 31, 1994 and September 30, 1995, respectively. The
pro forma information should be read in conjunction with the historical
financial information of 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, 1994 and September 30, 1995, respectively. The December 31, 1994 pro
forma amounts do not reflect the Partnership's 1995 receipt of $1,486,900
as a result of settling a pending lawsuit.
See Notes to Pro Forma Financial Statements.
Notes to Pro Forma Financial Statements
December 31, 1994 and September 30, 1995
The following notes describe the assumptions underlying the Pro
Forma Financial Statements. The Pro Forma Financial Statements have
been prepared to provide Limited Partners with information about the
continuing impact of the Partnership's Offer by showing how it might
have affected historical financial statements if the transaction had
been consummated at an earlier time. The actual results which would
have been achieved during the pro forma periods had the transactions
occurred on the assumed date may have varied from the Pro Forma
Financial Statements, and the variations may have been material.
Two alternative assumptions are presented for each Pro Forma
Financial Statement as of each balance sheet date and the period ended
as of such date. One alternative assumes that 1,313 Interests are
purchased by the Partnership using cash reserves existing as of
September 30, 1995, and no funds are borrowed to finance the Offer. The
other alternative assumes that the Partnership borrows $2 million at
8.75% per annum, incurs financing costs of 2% of the borrowings
($40,000), and repurchases a total of 3,763 Interests. The actual
amount of future borrowing will depend upon how many Interests are
tendered by Limited Partners to the Partnership, and the loan interest
rate, term, amortization period, and costs incurred to obtain financing.
The actual amount of future borrowing will also impact how may Interests
the Partnership will actually purchase. Payment of an estimated
$110,000 of expenses in connection with the Offer are reflected for each
alternative.
A. The historical Balance Sheet, Income Statement, and book value
figures are based on the audited financial statements as of and for the
year ended at December 31, 1994, and the unaudited financial statements
as of and for the nine months ended September 30, 1995.
B. Adjustments to the Pro Forma Balance Sheet give effect to
certain assumptions, including purchase by the Partnership of 1,313
Interests at $800 per Interest pursuant to the Offer if no funds are
borrowed, or the purchase by the Partnership of 3,763 Interests at $800
per Interest if $2 million is borrowed. Under these assumptions the
aggregate redemption would amount to $1,050,400 and $3,010,400,
respectively. The Pro Forma Balance Sheet gives effect to the
transaction as if it had occurred on the balance sheet date. However,
both alternative transactions as of December 31, 1994, result in a cash
deficit reported on the pro forma balance sheets because the proceeds
from the litigation settlement were not received until March 1995.
C. Adjustments to the condensed Pro Forma Statements of Income
give effect to certain assumptions, including purchase by the
Partnership of 1,313 Interests at $800 per Interest pursuant to the
Offer if no funds are borrowed, or the purchase by the Partnership of
3,763 Interests at $800 per Interest if $2 million is borrowed. The
unaudited Pro Forma Statements of Income give effect to this transaction
as if it had occurred at the beginning of the periods presented.
Interest expense has been increased to reflect the estimated cost of
borrowing additional funds needed to consummate the transaction. An
assumed interest rate of 8.75% per annum was used on the new mortgage
loan of $2,000,000.
D. Adjustments to the Pro Forma Book Value of Limited Partner
Interests reflect the effect on the book value of the Limited
Partnership Interests of the redemption of 1,313 Interests at $800 per
Interest pursuant to the Offer if no funds are borrowed, or the
redemption of 3,763 Interests at $800 per Interest if $2 million is
borrowed.
INDEPENDENT AUDITORS
The financial statements of the Partnership as of December 31,
1994, and 1993 and for each of the fiscal years in the three-year period
ended December 31, 1994, 1993, and 1992 included herein have been
audited by Ernst & Young LLP, independent auditors, as stated in their
report appearing herein.
AVAILABLE INFORMATION
The Partnership has filed a Rule 13e-3 Transaction Statement on
Schedule 13E-3 (the "Schedule 13E-3") and Schedule 13E-4 Issuer Tender
Offer Statement (the "Schedule 13E-4") with the Securities and Exchange
Commission (the "Commission") with respect to the Offer. As permitted
by the rules and regulations of the Commission, this Offer omits certain
information contained in the Schedule 13E-3 and Schedule 13E-4. Such
additional information can be inspected at and obtained from the
Commission and the National Association of Securities Dealers, Inc. in
the manner set forth below. For further information pertaining to the
Partnership reference is made to the Schedule 13E-3, Schedule 13E-4, and
the exhibits thereto. Statements contained herein concerning any such
documents are not necessarily complete and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Schedule
13E-3 and Schedule 13E-4. Each such statement is qualified in its
entirety by such reference.
The Partnership is subject to the informational requirements of the
Exchange Act, and in accordance therewith, files reports, proxy
statements and other information with the Commission. The Limited
Partnership Interests of the Partnership are not traded or listed.
Schedule 13E-3 and Schedule 13E-4 and the respective exhibits thereto,
as well as reports, proxy statements and other information filed by the
Partnership can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Chicago Regional Office, Northwestern Atrium Center, Suite
1400, S.W. West Madison Street, Chicago, Illinois 60611; and New York
Regional Office, 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy
statements and other information may also be inspected at the office of
the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
INDEX TO FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
Unaudited Condensed Balance Sheet as of September 30, 1995 . . . . F-1
Unaudited Condensed Statements of Operations for the
Nine Months Ended as of September 30, 1995 and 1994 . . . . . . F-2
Unaudited Condensed Statements of Cash Flows for the
Nine Months Ended as of September 30, 1995 and 1994 . . . . . . F-3
Notes to Unaudited Quarterly Financial Statements . . . . . . . . . F-4
Report of Independent Auditors . . . . . . . . . . . . . . . . . . F-5
Balance Sheets as of December 31, 1994 and 1993 . . . . . . . . . . F-6
Statements of Operations for the Years Ended December 31, 1994,
1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Statements of Changes in Partners' Capital for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . F-8
Statements of Cash Flows for the Years Ended December 31, 1994,
1993, and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . F-9
Notes to Financial Statements December 31, 1994 . . . . . . . . . . F-10
CONDENSED BALANCE SHEET (UNAUDITED)
September 30, 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,762,362
Prepaid expenses and other assets 73
INVESTMENT PROPERTY, AT COST: 3,087,960
Less: accumulated depreciation (753,171)
2,334,789
Total Assets $ 4,097,224
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Tenant security deposits $ 21,483
Accounts payable 9,150
Accrued property taxes 52,200
Payables to affiliates 518,818
Total Liabilities 601,651
PARTNERS' CAPITAL:
General Partner 45,926
Limited Partners (authorized
20,000 Interests; outstanding
4,751.16 Interests 3,449,647
Total Partners' Capital 3,495,573
Total Liabilities and Partners' Capital $ 4,097,224
See Notes to Financial Statements
F-1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Nine Months Ended September 30
1995 1994
Operating revenue:
Rental Income $ 330,776 $ 397,604
Operating expenses (216,568) (217,523)
Net income before depreciation and
other expenses 114,208 180,081
Depreciation (75,500) (76,900)
Net income from investment property 38,708 103,181
Other income (expenses):
Litigation settlement 1,387,641 0
Interest income 60,272 10,169
Interest expense (16,386) (16,386)
Partnership management (189,061) (541,312)
NET INCOME (LOSS) $1,281,174 $(444,348)
Net Income (loss) attributable to
General Partner(5%) $ 64,059 $ (22,217)
Net Income (loss) attributable to
Limited Partners(95%) 1,217,115 (422,131)
$1,281,174 $(444,348)
Net Income (Loss) per Limited Partner
Interest(4,751.16 interests outstanding) $ 256.17 $ (88.85)
See Notes to Financial Statements
F-2
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Nine Months Ended September 30,
1995 1994
OPERATING ACTIVITIES:
CASH PROVIDED BY (USED BY) OPERATIONS $1,482,875 $ (323,369)
INVESTING ACTIVITIES:
ADDITIONS TO PROPERTY & EQUIPMENT (10,656) (11,859)
FINANCING ACTIVITIES:
RECOVERY OF PRIOR YEAR RESCISSION EXPENSES 99,259 0
TENDER OFFER EXPENSES (128) 0
DISTRIBUTIONS PAID TO LIMITED PARTNERS 0 (178,168)
DISTRIBUTIONS PAID TO GENERAL PARTNER 0 (259)
NET CASH PROVIDED (USED) IN FINANCING
ACTIVITIES 99,131 (178,427)
INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS 1,571,350 (513,655)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 191,012 631,319
CASH AND CASH EQUIVALENTS
AT THE END OF PERIOD $1,762,362 $ 117,664
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
INTEREST PAID $ 0 $ 0
INCOME TAXES PAID $ 0 $ 0
See Notes to Financial Statements
F-3
Note A--Basis of Presentation
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine month period
ended September 30, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995.
For further information, refer to the financial statements and
footnotes thereto included in the Partnership's annual report on
Form 10-K for the year ended December 31, 1994.
F-4
Report of Independent Auditors
The Partners
Decade's Monthly Income and Appreciation
Fund A Limited Partnership
We have audited the accompanying balance sheets of Decade's
Monthly Income and Appreciation Fund A Limited Partnership (the
Partnership) as of December 31, 1994 and 1993, and the related
statements of operations, changes in Partners' capital and cash
flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Partnership as of December 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
January 27, 1995, except for
Note 6, as to which the date
is March 2, 1995
F-5
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Balance Sheets
December 31
1994 1993
Assets
Cash and cash equivalents $191,012 $631,319
Prepaid expenses and other 745 621
assets
Investment property, at cost:
Land 284,250 284,250
Buildings and improvements 2,592,674 2,592,674
Equipment 200,380 182,067
3,077,304 3,058,991
Less accumulated depreciation (677,671) (576,157)
2,399,633 2,482,834
$2,591,390 $3,114,774
Liabilities and Partners
capital
Liabilities:
Tenant security deposits $16,808 $19,571
Accounts payable 9,696 14,423
Other accrued expenses 69,250 71,751
Distributions payable 59,389
Payable to affiliates 380,368 362,409
476,122 527,543
Partners' capital:
General Partner (deficit) (117,392) (99,607)
Limited Partners (interests 2,232,660 2,686,838
authorized 20,000; interests
outstanding 4,751.16 in 1994 and
1993)
2,115,268 2,587,231
$2,591,390 $3,114,774
F-6
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Statements of Operations
Year ended December 31
1994 1993 1992
Operating revenues associated
with investment property:
Rentals $ 496,351 $505,918 $496,653
Other 15,298 16,705 18,288
511,649 522,623 514,941
Operating expenses
associated with investment
property:
Operating 202,468 179,806 158,229
Administrative 23,529 21,954 28,286
Depreciation 101,514 122,085 118,826
Real estate taxes 69,250 71,751 73,168
396,761 395,596 378,509
Income from investment 114,888 127,027 136,432
property operations
Other Partnership income
(expense):
Interest income 9,949 21,085 18,522
Fees and interest to (21,850) (21,850) (22,376)
affiliates
Amortization of (533) (2,913)
organization expenses
Administrative expenses (453,511) (161,232) (88,121)
(465,412) (162,530) (94,888)
Net income (loss) $(350,524) $ (35,503) $ 41,544
Net income (loss)
attributable to General
Partner $ (17,526) $ (1,775) $ 2,077
Net income (loss)
attributable to Limited (332,998) (33,728) 39,467
Partners
$(350,524) $ (35,503) $ 41,544
Net income (loss) per $(70.09) $(7.10) $8.31
Limited Partnership
interest
F-7
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Statements of Changes in Partners' Capital
General
Limited Partner's Limited
Partnership Capital Partner's
Interests (Deficit) Capital Total
Balances at 4,751.16 $(95,721) $2,918,656 $2,822,935
January 1,
1992
Net income for - 2,077 39,467 41,544
the year
Balances at 4,751.16 (93,644) 2,958,123 2,864,479
December 31,
1992
Distributions - (4,188) (237,557) (241,745)
to Partners
Net loss for - (1,775) (33,728) (35,503)
the year
Balances at 4,751.16 (99,607) 2,686,838 2,587,231
December 31,
1993
Distributions - (259) (118,780) (119,039)
to Partners
Tender offer - (2,400) (2,400)
expense
Net loss for - (17,526) (332,998) (350,524)
the year
Balances at 4,751.16 $(117,392) $2,232,660 $2,115,268
December 31,
1994
( ) denotes deficit or deduction.
F-8
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Statements of Cash Flows
Year ended December 31
1994 1993 1992
Operating activities
Net income (loss) $(350,524) $(35,503) $ 41,544
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation 101,514 122,085 118,826
Amortization of organization 533 2,913
expenses
Changes in operating assets
and liabilities:
Prepaid expenses and other (124) (119) 766
assets
Tenant security deposits (2,763) (716) 1,511
Accounts payable (4,727) 2,269 1,934
Other accrued expenses (2,501) (1,417) 3,132
Payable to affiliates 17,959 14,921 (12,679)
Net cash provided by (used (241,166) 102,053 157,947
in) operating activities
Investing activity
Additions to investment (18,313) (13,138) (13,815)
property
Financing activities
Distributions paid to Limited (178,169) (178,168)
Partners
Distributions paid to General (259) (4,188)
Partner
Payment of tender offer (2,400)
expense
Net cash used in financing (180,828) (182,356)
activities
Increase (decrease) in cash (440,307) (93,441) 144,132
and cash equivalents
Cash and cash equivalents at 631,319 724,760 580,628
beginning of year
Cash and cash equivalents at $ 191,012 $631,319 $724,760
end of year
F-10
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Notes to Financial Statements
December 31, 1994
1. Organization and Basis of Accounting
Organization
Decade's Monthly Income and Appreciation Fund A Limited
Partnership (the Partnership) was organized as a limited
partnership under the laws of the State of Wisconsin pursuant to
a Certificate and an Agreement of Limited Partnership
(Agreement), as amended on August 11, 1987, for the purpose of
investing in residential and commercial real property and making
equity-participating loans on existing income-producing
properties. The Agreement of Limited Partnership authorized the
issuance of interests through a public offering. The minimum and
maximum number of interests to be sold were 1,175 and 20,000,
respectively, for a total Limited Partner investment of
$1,175,000 and $20,000,000, respectively. At the option of the
General Partner, the maximum number of interests to be sold could
have been increased to 30,000, aggregating Limited Partnership
interests of $30,000,000. The Partnership is to be dissolved on
or before December 31, 2005. The Partnership began operations on
May 25, 1988.
The Partnership consists of a General Partner, Decade Companies
A General Partnership, of which Jeffrey Keierleber and Decade 80,
Inc., are the general partners, and 613 Limited Partners at
December 31, 1994.
Basis of Accounting
The Partnership records are maintained on the modified cash basis
of accounting. The accompanying financial statements have been
prepared from such records adjusted to the accrual basis of
accounting including adjustments for differences in depreciation
methods. Certain accrual and tax basis amounts are summarized as
follows:
F-11
1994 1993 1992
Accrual Tax Accrual Tax Accrual Tax
Basis Basis Basis Basis Basis Basis
(In Thousands)
Total assets $2,591 $3,287 $3,115 $3,814 $3,318 $4,003
Partners'
capital
(deficit):
General (117) (17) (100) (94) 5
Partner
Limited 2,233 3,208 2,687 3,708 2,958 3,893
Partners
Net income
(loss):
General (17) (17) (2) 2
Partner
Limited (333) (322) (34) (6) 39 38
Partners
F-12
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies
Cash Equivalents
The Partnership considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. Such investments are carried at cost which
approximates market value.
Depreciation
Depreciation is computed by the straight-line method using
estimated useful lives of 30 years for the buildings and
improvements and 5 years for related equipment.
For federal income tax purposes, the Partnership has adopted
various accelerated methods which provide for depreciation of
buildings and improvements over 27.5 years and related equipment
over 7 years.
Fees to Affiliates
Organization expenses, acquisition fees, mortgage placement and
mortgage brokerage fees, property management fees and partnership
management fees are payable to the General Partner or affiliates
of the General Partner. These fees are charged to expense as
follows:
Organization Expenses
Expenses of organizing the Partnership were amortized over five
years. The expenses were fully amortized as of December 31, 1993.
Acquisition Fees
Acquisition fees designated for selection, negotiation and
purchase of Partnership property have been capitalized as
investment property and allocated to land, buildings and
improvements and equipment based on appraised values. The
portions allocated to buildings and improvements and equipment
have been depreciated over the respective lives of the buildings
and improvements and equipment.
F-13
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Mortgage Placement and Mortgage Brokerage Fee
Fees for services rendered in locating potential borrowers and
investigating their credit worthiness for placement of mortgage
loans are payable by the Partnership to the extent not paid by
the mortgagor. Any fees paid by the Partnership will be charged
to expense over the terms of the mortgage loans.
Property Management Fees
Fees for property management and rental services are being
charged to expense over the period property management services
are being performed.
Partnership Management Fees
Fees for partnership management services are being charged to
expense over the period the partnership management services are
being performed.
Expenses of Offering
Sales commissions, underwriting fees and reimbursed syndication
costs paid to the General Partner or affiliates of the General
Partner have been recorded as a charge to Limited Partners'
capital.
Rescission Offering Expenses
The Partnership filed with the Securities and Exchange Commission
an offer to repurchase certain outstanding Limited Partner
interests (the Rescission Offer ). The General Partner has
committed to reimburse the Partnership for legal and accounting
fees, registration and filing fees and printing and mailing costs
associated with the Rescission Offer which the Partnership is
unable to recover from other sources. Expenses incurred relating
to the Rescission Offer have been charged to General Partner's
capital pending resolution of the civil action described in Note
6.
F-14
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Reimbursed Expenses
The Partnership reimburses the General Partner and affiliates of
the General Partner for the actual cost of goods and services
used by or for the Partnership in the course of performing the
general functions of the Partnership. These general functions
include accounting, investor communications, investor
documentation, legal services, tax services, computer services,
risk management and any other related operational and
administrative expenses necessary for the prudent organization
and operation of the Partnership.
Reimbursed expenses paid by the General Partner or affiliates of
the General Partner on behalf of the Partnership were as follows:
Decade Companies ($65,468 1994, $72,857 1993 and $24,507 1992)
and Decade Properties, Inc. ($88,085 1994, $79,697 1993 and
$73,452 1992).
Allocations and Distributions
Pursuant to the Agreement, net income and losses from operations
(exclusive of those from the sale or other disposition of
Partnership properties) are to be allocated as follows: 1) until
the expiration of 36 months following commencement of operations
(May 25, 1988), 99% to the Limited Partners and 1% to the General
Partner; thereafter 2) 95% to the Limited Partners and 5% to the
General Partner. If the General Partner contributes in excess of
5% of the Partnership's capital, then, following the expiration
of 36 months following commencement of operations, the General
Partner's interest in net income and losses from operations is to
be equal to the percentage contributed.
Any gains from the sale or other disposition of Partnership
properties are to be allocated to each Partner in amounts equal
to the cash distributed to each Partner in connection with the
sale or other disposition of Partnership properties (other than
cash distributed as a tax-free return of capital). Losses from
the sale or other disposition of Partnership properties are to be
allocated 99% to the Limited Partners and 1% to the General
Partner. If the General Partner contributes in excess of 1% of
the Partnership's capital, then the General Partner is to be
allocated losses equal to the percentage contributed.
F-15
2. Summary of Significant Accounting Policies (continued)
Until the expiration of 36 months following the commencement of
operations (May 25, 1988), cash available for distribution, as
defined in the Agreement, will be distributed 100% to the Limited
Partners in an amount at least equal to the Limited Partners
guaranteed front-end return. Thereafter, cash available for
distribution is to be distributed 95% to the Limited Partners and
5% to the General Partner. If the General Partner makes
supplemental cash contributions in excess of 5% of the
Partnership's capital, then the amount distributed to the General
Partner is to be increased to be equal to the percentage
contributed. Notwithstanding the foregoing, the sum of any cash
available for distribution and any partnership management fee
paid to the General Partner for a fiscal year will not exceed 10%
of the distributions of cash available for distribution. Except
upon liquidation of the Partnership, net sale proceeds of
Partnership properties are to be distributed as follows: 1) to
the Limited Partners until their capital investments are reduced
to zero plus an amount equal to their cumulative Limited Partner
Residual Priority (an amount equal to 6% per annum, cumulative
but not compounded of the Limited Partners' capital investments
minus any prior distributions of cash available for distribution
or sale proceeds to the extent that prior distributions of sale
proceeds exceed their original capital investments) compounded;
2) to the General Partner, an amount equal to the General Partner
Residual Priority (an amount equal to the greater of its capital
contribution or 1% of net sale proceeds plus a real estate
brokerage commission equal to 3% of the gross proceeds from sales
of Partnership properties actually sold by General Partner); 3)
90% of the remaining net sale proceeds to the Limited Partners
and 10% to the General Partner. The total sales proceeds paid to
the General Partner shall not exceed the General Partner Residual
Limit (15% of distributions of sales proceeds remaining after
payment to the Limited Partners of 100% of their capital
investments plus the Limited Partner Residual Priority). Upon
dissolution of the Partnership, the General Partner shall
liquidate the assets of the Partnership, apply and distribute the
proceeds thereof, first to the payment of obligations of the
Partnership and the expenses of liquidation, then to establishing
reserves for contingencies which the General Partner may consider
necessary, then to the Partners in accordance with their capital
accounts.
Net Income (Loss) Per Limited Partnership Interest
Net income (loss) per Limited Partnership interest is based on
95% of net income (loss) as allocated to the Limited Partners
divided by the weighted average number of interests outstanding.
F-16
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Notes to Financial Statements (continued)
3. Investment Property
Investment property consists of the following at December 31, 1994:
Costs Capitalized
Subsequent to
Initial Cost to Partnership Acquisition
Buildings and Building and
Description Land Improvements Equipment Total Improvements Equipment
(In Thousands)
Meadows 1
Apartments,
Madison, Wisconsin $284 $2,587 $125 $2,996 $ 6 $75
Gross Amount at Which Carried
Buildings and Accumulated
Description Land Improvements Equipment Total Depreciation
(In Thousands)
Meadows 1
Apartments,
Madison, Wisconsin $284 $2,593 $200 $3,077 $678
F-17
The Meadows I Apartments were constructed in 1976 and acquired by
the Partnership on January 17, 1989. The General Partner earned
an acquisition fee from the Partnership of $242,237 related to
the purchase of the investment property which was capitalized as
part of the initial cost of the investment property. The
acquisition fee has not been paid as of December 31, 1994.
A reconciliation of the cost and accumulated depreciation of the
investment property at December 31 follows:
1994 1993 1992
(In Thousands)
Cost
Balance at beginning of $3,059 $3,046 $3,032
year
Additions to investment 18 13 14
property
Balance at end of year $3,077 $3,059 $3,046
Accumulated depreciation
Balance at beginning of $ 576 $ 454 $ 335
year
Provision for year 102 122 119
Balance at end of year $ 678 $ 576 $ 454
There were no encumbrances on the investment property at December
31, 1994. The aggregate cost of investment property for federal
income tax purposes is $2,835,067 because the acquisition fee
payable to the General Partner is capitalizable for financial
F-18
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Notes to Financial Statements (continued)
3. Investment Property (continued)
reporting purposes only. The accumulated depreciation for federal
income tax purposes was $661,238, $553,032 and $446,641 at
December 31, 1994, 1993 and 1992, respectively.
4. Income Taxes
The Partnership has received an opinion from legal counsel that
it will be classified as a partnership for federal income tax
purposes. Therefore, Partnership losses or income and taxes
attributable thereto will be the responsibility of the various
Partners and no provision for income taxes has been made in the
Partnership's financial statements.
Differences between net income (loss) as reported herein and net
income (loss) reported for federal income tax purposes arise from
timing differences related to start-up expenses, interest expense
on fees to affiliates and depreciation. The following is a
reconciliation of reported net income (loss) and net income
(loss) reported for federal income tax purposes:
Year ended December 31
1994 1993 1992
Net income (loss) as reported $(350,524) $(35,503) $41,544
Add (deduct):
Depreciation (6,693) 15,695 9,940
Start-up expense amortization (1,519) (8,300)
Accrual basis adjustments 18,096 14,766 (5,186)
Net income (loss) reported for
federal income tax purposes $(339,121) $(6,561) $37,998
5. Transactions with Related Parties
Decade Companies and its general partner are general partners for
other limited partnerships which have invested in real estate.
The Partnership also shares certain management and accounting
employees and other expenses with entities that are controlled by
Decade Companies and its general partner. In addition to the
F-19
reimbursement of expenses discussed in Note 2, the Partnership
has executed certain contracts providing for the following fees
payable to the General Partner or to affiliates of the General
Partner:
F-20
Decade's Monthly Income and Appreciation Fund
A Limited Partnership
Notes to Financial Statements (continued)
5. Transactions with Related Parties (continued)
Decade Companies
Decade Companies earned the following amounts from the
Partnership: interest on acquisition fees ($21,850 1994,
$21,850 1993 and $21,850 1992), partnership management fees
($257 1994, $4,188 1993 and $20,459 1992) and interest on
partnership management fees ($526 1992). Acquisition fees of
$242,237 are payable to Decade Companies at December 31, 1994.
Such fees were capitalized into the cost of the rental property.
Accrued interest on acquisition fees of $131,100 is unpaid at
December 31, 1994. In addition, expense reimbursements of $2,333
are payable at December 31, 1994.
Decade Properties, Inc.
Decade Properties, Inc. earned property management fees from the
Partnership ($25,691 1994, $26,176 1993 and $25,620 1992). In
addition, expense reimbursements of $5,092 are payable at
December 31, 1994.
The acquisition fee payable and other deferred payments to
affiliates bear interest at the minimum rate required under the
Internal Revenue Code (the Code) to avoid imputed interest under
the Code and are payable only from sales proceeds, Partnership
operations, or cash reserves.
Charges by affiliated parties in 1995 are estimated by management
to approximate $27,000 for property management fees. Interest
charges on payables to affiliates in 1995 are expected to
approximate 1994 amounts.
6. Litigation
On July 11, 1989, due to federal and state securities
registration problems, the Partnership suspended all offers and
sales of limited partnership interests. The General Partner
believed there was a valid claim against the law firm that was
advising the Partnership on making the appropriate federal and
state filings. Accordingly, the Partnership and certain
affiliates commenced a civil action against the law firm and its
insurance carrier.
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6. Litigation (continued)
On August 20, 1994, the Partnership and certain affiliates agreed
to settle the civil action against the law firm and its insurance
carrier in exchange for $5,750,000. Accordingly, the court
dismissed the civil action pursuant to the settlement agreement.
As of December 31, 1994, the amount of proceeds to be allocated
to the Partnership had not been determined. The final allocation
and distribution of settlement proceeds to the Partnership and
certain affiliates is dependent upon approval of such allocation
by both the plaintiffs' and defendants' attorneys. As of January
27, 1995, management estimated the Partnership would be allocated
proceeds of approximately $1,486,900, which were received on
March 2, 1995.
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