1
Offer to Purchase For Cash
AIMCO
AIMCO Properties, L.P.
is offering to purchase any and all limited partnership units in
HCW PENSION REAL ESTATE
FUND LIMITED PARTNERSHIP
FOR $82 PER UNIT IN CASH
Upon the terms and subject to the conditions set forth herein, we will accept
any and all units validly tendered in response to our offer. If units are
validly tendered and not properly withdrawn prior to the expiration date and the
purchase of all such units would result in there being less than 320 limited
partners, we will purchase only 99% of the total number of units so tendered by
each limited partner.
Our offer and your withdrawal rights will expire at 5:00 p.m., New York City
time, on September 27, 2001, unless we extend the deadline.
You will not pay any partnership transfer fees if you tender your units. You
will pay any other fees and costs, including any transfer taxes.
Our offer price will be reduced for any distributions subsequently made by your
partnership prior to the expiration of our offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS OFFER TO PURCHASE FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER, INCLUDING THE FOLLOWING:
o We determined the offer price of $82 per unit without any arms-length
negotiations. Accordingly, our offer price may not reflect the fair
market value of your units.
o Your general partner and the residential property manager are
subsidiaries of ours, and the general partner therefore has substantial
conflicts of interest with respect to our offer.
o We are making this offer with a view to making a profit and, therefore,
there is a conflict between our desire to purchase your units at a low
price and your desire to sell your units at a high price.
o Continuation of your partnership will result in our affiliates
continuing to receive management fees from your partnership. Such fees
would not be payable if your partnership were liquidated.
(Continued on next page)
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If you decide to accept our offer, you should complete and sign the
enclosed acknowledgment and agreement as instructed in the letter of transmittal
attached as Annex II. The signed acknowledgment and agreement and any other
documents required by the letter of transmittal must be mailed or delivered to
River Oaks Partnership Services, Inc., which is acting as Information Agent in
connection with our offer, at one of its addresses set forth on the back cover
of this offer to purchase. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR
ADDITIONAL COPIES OF THIS OFFER TO PURCHASE, THE ACKNOWLEDGMENT AND AGREEMENT,
OR THE LETTER OF TRANSMITTAL MAY ALSO BE DIRECTED TO THE INFORMATION AGENT AT
(888) 349-2005.
August 29, 2001
2
(Continued from prior page)
o It is possible that we may conduct a future offer at a higher price.
o For any units that we acquire from you, you will not receive any future
distributions from operating cash flow of your partnership or upon a
sale or refinancing of property owned by your partnership.
o If we acquire a substantial number of units, we will increase our
ability to influence voting decisions with respect to your partnership
and may control such voting decisions, including but not limited to the
removal of the general partner, most amendments to the partnership
agreement and the sale of all or substantially all of your
partnership's assets.
THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
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By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, NJ 07606-2065 Carlstadt, NJ 07072 Carlstadt, NJ 07072
Attn: Reorganization Dept. Attn: Reorganization Dept.
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For information, please call:
TOLL FREE: (888) 349-2005
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TABLE OF CONTENTS
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<Caption>
Page
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SUMMARY TERM SHEET.........................................................................................1
RISK FACTORS...............................................................................................3
WE DID NOT OBTAIN A THIRD PARTY VALUATION OR APPRAISAL AND DID NOT DETERMINE THE OFFER PRICE
THROUGH ARMS-LENGTH NEGOTIATION....................................................................3
OUR OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE....................................................3
OUR OFFER PRICE DOES NOT REFLECT FUTURE PROSPECTS......................................................3
OUR OFFER PRICE MAY NOT REPRESENT LIQUIDATION VALUE....................................................3
HOLDING YOUR UNITS MAY RESULT IN GREATER FUTURE VALUE..................................................3
YOUR GENERAL PARTNER FACES CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER.............................3
THE GENERAL PARTNER IS NOT MAKING A RECOMMENDATION.....................................................3
YOUR GENERAL PARTNER FACES CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES...........................3
WE MAY MAKE A FUTURE OFFER AT A HIGHER PRICE...........................................................4
YOU WILL RECOGNIZE TAXABLE GAIN ON A SALE OF YOUR UNITS................................................4
IF YOU TENDER YOUR UNITS IN THIS OFFER, YOU WILL NOT BE ENTITLED TO FUTURE DISTRIBUTIONS FROM YOUR
PARTNERSHIP.........................................................................................4
IF WE ACQUIRE A SUBSTANTIAL NUMBER OF UNITS IN THIS OFFER, WE COULD CONTROL YOUR PARTNERSHIP...........4
YOU COULD RECOGNIZE GAIN IN THE EVENT OF A REDUCTION IN YOUR PARTNERSHIP'S LIABILITIES.................4
YOU MAY BE UNABLE TO TRANSFER YOUR UNITS FOR A 12-MONTH PERIOD.........................................5
WE MAY DELAY ACCEPTANCE OF, AND PAYMENT FOR, YOUR UNITS................................................5
THE OFFER..................................................................................................5
SECTION 1 TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.............................................5
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS...............................................6
SECTION 3. PROCEDURE FOR TENDERING UNITS..............................................................7
SECTION 4. WITHDRAWAL RIGHTS..........................................................................9
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT; NO SUBSEQUENT OFFERING
PERIOD..................................................................................9
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS........................................................10
SECTION 7. EFFECTS OF THE OFFER......................................................................13
SECTION 8. INFORMATION CONCERNING US AND CERTAIN OF OUR AFFILIATES...................................13
SECTION 9. BACKGROUND AND REASONS FOR THE OFFER......................................................16
SECTION 10 POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER.............21
SECTION 11. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES....................................22
SECTION 12. FUTURE PLANS OF THE PURCHASER.............................................................22
SECTION 13. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP...........................................23
SECTION 14. VOTING POWER..............................................................................27
SECTION 15. SOURCE OF FUNDS...........................................................................27
SECTION 16. DISSENTERS' RIGHTS........................................................................27
SECTION 17. CONDITIONS OF THE OFFER...................................................................27
SECTION 18. CERTAIN LEGAL MATTERS.....................................................................29
SECTION 19. FEES AND EXPENSES.........................................................................30
ANNEX I OFFICERS AND DIRECTORS............................................................................31
ANNEX II LETTER OF TRANSMITTAL............................................................................36
</Table>
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SUMMARY TERM SHEET
This summary term sheet highlights the most material information
regarding our offer, but it does not describe all of the details thereof. We
urge you to read this entire offer to purchase, which contains the full details
of our offer. We have also included in the summary term sheet references to the
sections of this offer to purchase where a more complete discussion may be
found.
o THE OFFER. Subject to the terms hereof, we are offering to acquire any
and all of the limited partnership units of Drexel Burnham Lambert Real
Estate Associates II, your partnership, for $82 per unit in cash. See
"The Offer--Section 1. Terms of the Offer; Expiration Date; Proration"
and "The Offer--Section 9. Background and Reasons for the
Offer--Determination of Offer Price."
o FACTORS IN DETERMINING THE OFFER PRICE. In determining the offer price
per unit we principally considered:
o Our belief that the per unit liquidation value of your
partnership is equal to our offer price per unit.
o There is no trading market for the units. See "The
Offer--Section 9. Background and Reasons for the
Offer--Comparison of Consideration to Alternative
Consideration."
o PRORATIONS. If the purchase of all validly tendered units would result
in there being less than 320 holders of units, we will purchase only
99% of the total number of units so tendered by each holder. See "The
Offer--Section 1. Terms of the Offer; Expiration Date; Proration."
o EXPIRATION DATE. Our offer expires on September 27, 2001, unless
extended, and you can tender your units until our offer expires. See
"The Offer--Section 1. Terms of the Offer; Expiration Date; Proration."
o RIGHT TO EXTEND THE EXPIRATION DATE. We can extend the offer in our
sole discretion, and we will either issue a press release or send you a
notice of any such extension. See "The Offer--Section 5. Extension of
Tender Period; Termination; Amendment; No Subsequent Offering Period."
o HOW TO TENDER. To tender your units, complete the accompanying
acknowledgment and agreement and send it, along with any other
documents required by the letter of transmittal attached as Annex II,
to the Information Agent, River Oaks Partnership, Inc., at one of the
addresses set forth on the back of this offer to purchase. See "The
Offer--Section 3. Procedures for Tendering."
o WITHDRAWAL RIGHTS. You can withdraw your units at any time prior to the
expiration of the offer, including any extensions. In addition, you can
withdraw your units at any time on or after October 26, 2001 if we have
not already accepted units for purchase and payment. See "The
Offer--Section 4. Withdrawal Rights."
o HOW TO WITHDRAW. To withdraw your units, you need to send a notice of
withdrawal to the Information Agent, identifying yourself and the units
to be withdrawn. See "The Offer--Section 4. Withdrawal Rights."
o TAX CONSEQUENCES. Your sale of units in this offer will be a taxable
transaction for federal income tax purposes. The consequences to each
limited partner may vary and you should consult your tax advisor on the
precise tax consequences to you. See "The Offer--Section 6. Certain
Federal Income Tax Matters."
o AVAILABILITY OF FUNDS. We currently have the necessary cash and a line
of credit to consummate the offers. See "The Offer--Section 15. Source
of Funds."
o CONDITIONS TO THE OFFER. There are a number of conditions to our offer,
including our having adequate cash and borrowings under a line of
credit, the absence of competing tender offers, the absence of certain
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changes in your partnership, and the absence of certain changes in the
financial markets. See "The Offer--Section 17. Conditions to the
Offer."
o REMAINING AS A LIMITED PARTNER. If you do not tender your units, you
will continue to remain a limited partner in your partnership. We have
no plans to alter the operations, business or financial position of
your partnership or to take your partnership private. See "The
Offer--Section 7. Effects of the Offer."
o WHO WE ARE. We are AIMCO Properties, L.P., the main operating
partnership of Apartment Investment and Management Company, a New York
Stock Exchange listed company. See "The Offer--Section 8. Information
Concerning Us and Certain of Our Affiliates."
o CONFLICTS OF INTEREST. Our subsidiary receives fees for managing your
partnership's residential property and the general partner of your
partnership (which is also our subsidiary) is entitled to receive
payment for services and reimbursement of certain expenses involving
your partnership and its property. As a result, a conflict of interest
exists between continuing the partnership and receiving these fees, and
the liquidation of the partnership and the termination of these fees.
See "The Offer--Section 11. Conflicts of Interests" and "The
Offer--Section 13. Certain Information Concerning Your Partnership."
o NO GENERAL PARTNER RECOMMENDATION. The general partner of your
partnership makes no recommendation as to whether you should tender or
refrain from tendering your units, and believes each limited partner
should make his or her own decision whether or not to tender. See "The
Offer--Section 10. Position of the General Partner of Your Partnership
with Respect to the Offer."
o NO SUBSEQUENT OFFERING PERIOD. We do not intend to have a subsequent
offering period after the expiration date of the initial offering
period (including any extensions). See "The Offer--Section 5. Extension
of Tender Offer Period; Termination; Amendment; No Subsequent Offering
Period."
o ADDITIONAL INFORMATION. For more assistance in tendering your units,
please contact our Information Agent at one of the addresses or the
telephone number set forth on the back cover page of this offer to
purchase.
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RISK FACTORS
Before deciding whether or not to tender any of your units, you should
consider carefully the following risks and disadvantages of the offer:
WE DID NOT OBTAIN A THIRD PARTY VALUATION OR APPRAISAL AND DID NOT DETERMINE THE
OFFER PRICE THROUGH ARMS-LENGTH NEGOTIATION.
We did not base our valuation of the property owned by your partnership
on any third-party appraisal or valuation. We established the terms of our offer
without any arms-length negotiation. The terms of the offer could differ if they
were subject to independent third party negotiations. It is uncertain whether
our offer price reflects the value that would be realized upon a sale of your
units to a third party.
OUR OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE.
There is no established or regular trading market for your units, nor
is there another reliable standard for determining the fair market value of the
units. Our offer price does not necessarily reflect the price that you would
receive in an open market for your units. Such prices could be higher than our
offer price.
OUR OFFER PRICE DOES NOT REFLECT FUTURE PROSPECTS.
Our offer price is based on your partnership's property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's residential property.
OUR OFFER PRICE MAY NOT REPRESENT LIQUIDATION VALUE.
The actual proceeds obtained from liquidation are highly uncertain and
could be more than our estimate. Accordingly, our offer price could be less than
the net proceeds that you would realize upon an actual liquidation of your
partnership.
HOLDING YOUR UNITS MAY RESULT IN GREATER FUTURE VALUE.
Although a liquidation of your partnership is not currently
contemplated in the near future, you might receive more value if you retain your
units until your partnership is liquidated.
YOUR GENERAL PARTNER FACES CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER.
The general partner of your partnership is our subsidiary, and
therefore has substantial conflicts of interest with respect to our offer. We
are making this offer with a view to making a profit. There is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price. We determined our offer price without negotiation
with any other party, including any general or limited partner.
THE GENERAL PARTNER IS NOT MAKING A RECOMMENDATION.
The general partner of your partnership makes no recommendation as to
whether or not you should tender or refrain from tendering your units. Although
the general partner believes the offer is fair, you must make your own decision
whether or not to participate in the offer based upon a number of factors,
including several factors that may be personal to you, such as your financial
position, your need or desire for liquidity, your preferences regarding the
timing of when you might wish to sell your units, other financial opportunities
available to you, and your tax position and the tax consequences to you of
selling your units.
YOUR GENERAL PARTNER FACES CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES.
Because we or our subsidiaries receive fees for managing your
partnership and its residential property, a conflict of interest exists between
continuing the partnership and receiving such fees, and the liquidation of the
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partnership and the termination of such fees. Also, a decision of the limited
partners of your partnership to remove, for any reason, the general partner of
your partnership or the residential property manager of the property owned by
your partnership would result in a decrease or elimination of the substantial
fees to which they are entitled for services provided to your partnership.
WE MAY MAKE A FUTURE OFFER AT A HIGHER PRICE.
It is possible that we may conduct a future offer at a higher price.
Such a decision will depend on, among other things, the performance of the
partnership, prevailing economic conditions, and our interest in acquiring
additional units.
YOU WILL RECOGNIZE TAXABLE GAIN ON A SALE OF YOUR UNITS.
Your sale of units for cash will be a taxable sale, with the result
that you will recognize taxable gain or loss measured by the difference between
the amount realized on the sale and your adjusted tax basis in the units of
limited partnership interest of your partnership you transfer to us. The "amount
realized" with respect to a unit of limited partnership interest you transfer to
us will be equal to the sum of the amount of cash received by you for the unit
sold pursuant to the offer plus the amount of partnership liabilities allocable
to the unit. The particular tax consequences for you of our offer will depend
upon a number of factors related to your tax situation, including your tax basis
in the units you transfer to us, whether you dispose of all of your units, and
whether you have available suspended passive losses, credits or other tax items
to offset any gain recognized as a result of your sale of your units. Therefore,
depending on your basis in the units and your tax position, your taxable gain
and any tax liability resulting from a sale of units to us pursuant to the offer
could exceed our offer price. Because the income tax consequences of tendering
units will not be the same for everyone, you should consult your own tax advisor
to determine the tax consequences of the offer to you.
IF YOU TENDER YOUR UNITS IN THIS OFFER, YOU WILL NOT BE ENTITLED TO FUTURE
DISTRIBUTIONS FROM YOUR PARTNERSHIP.
If you tender your units in response to our offer, you will transfer to
us all right, title and interest in and to all of the units we accept, and the
right to receive all distributions in respect of such units on and after the
date on which we accept such units for purchase. Accordingly, for any units that
we acquire from you, you will not receive any future distributions from
operating cash flow of your partnership or upon a sale or refinancing of the
property owned by your partnership.
IF WE ACQUIRE A SUBSTANTIAL NUMBER OF UNITS IN THIS OFFER, WE COULD CONTROL YOUR
PARTNERSHIP.
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our subsidiary, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units must approve certain
extraordinary transactions, including the removal of the general partner, most
amendments to the partnership agreement and the sale of all or substantially all
of your partnership's assets. We beneficially own 5,181, or 33.00%, of the
outstanding units of your partnership. If we acquire more than an additional
17.00% of the outstanding units, we will beneficially own a majority of the
outstanding units and will have the ability to control any vote of the limited
partners.
YOU COULD RECOGNIZE GAIN IN THE EVENT OF A REDUCTION IN YOUR PARTNERSHIP'S
LIABILITIES.
Generally, a decrease in your share of partnership liabilities is
treated, for federal income tax purposes, as a deemed cash distribution.
Although the general partner of your partnership does not have any current plan
or intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause the
general partner to reduce the liabilities of your partnership. If you retain all
or a portion of your units and the liabilities of your partnership were to be
reduced, you would be treated as receiving a hypothetical distribution of cash
resulting from a decrease in your share of the liabilities of the partnership.
Any such hypothetical distribution of cash would be treated as a nontaxable
return of capital to the extent of your adjusted tax basis in your units and
thereafter as gain. Gain recognized by you on the disposition of retained units
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with a holding period of 12 months or less may be classified as short-term
capital gain and subject to taxation at ordinary income tax rates.
YOU MAY BE UNABLE TO TRANSFER YOUR UNITS FOR A 12-MONTH PERIOD.
Your partnership's agreement of limited partnership prohibits any
transfer of an interest if such transfer, together with all other transfers
during the preceding 12 months, would cause 50% or more of the total interest in
capital and profits of your partnership to be transferred within such 12-month
period. If we acquire a significant percentage of the interest in your
partnership, you may not be able to transfer your units for a 12-month period
following our offer.
WE MAY DELAY ACCEPTANCE OF, AND PAYMENT FOR, YOUR UNITS.
We reserve the right to extend the period of time during which our
offer is open and thereby delay acceptance for payment of any tendered units.
The offer may be extended indefinitely, and no payment will be made in respect
of tendered units until the expiration of the offer and acceptance of units for
payment.
THE OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION
Upon the terms and subject to the conditions of the offer, we will
accept (and thereby purchase) any and all units that are validly tendered on or
prior to the expiration date and not withdrawn in accordance with the procedures
set forth in "The Offer--Section 4. Withdrawal Rights." For purposes of the
offer, the term "expiration date" shall mean 5:00 p.m., New York City time, on
September 27, 2001, unless we in our sole discretion shall have extended the
period of time for which the offer is open, in which event the term "expiration
date" shall mean the latest time and date on which the offer, as extended by us,
shall expire. See "The Offer--Section 5. Extension of Tender Period;
Termination; Amendment; No Subsequent Offering Period," for a description of our
right to extend the period of time during which the offer is open and to amend
or terminate the offer.
The purchase price per unit will automatically be reduced by the
aggregate amount of distributions per unit, if any, made by your partnership to
you on or after the commencement of our offer and prior to the date on which we
acquire your units pursuant to our offer.
If, prior to the expiration date, we increase the consideration offered
pursuant to the offer, the increased consideration will be paid for all units
accepted for payment pursuant to the offer, whether or not the units were
tendered prior to the increase in consideration.
If units are validly tendered prior to the expiration date and not
properly withdrawn prior to the expiration date in accordance with the
procedures set forth in "The Offer--Section 4. Withdrawal Rights" and the
purchase of all such units would result in (i) a "Rule 13e-3 transaction" within
the meaning of the Securities Exchange Act of 1934 (the "Exchange Act"), or (ii)
there being less than 320 limited partners, we will purchase only 99% of the
total number of units so tendered by each limited partner (subject to any
necessary adjustment for fractional units). If we are going to purchase only 99%
of the units validly tendered, we will notify you of such fact. In such case,
you would continue to be a limited partner and receive a K-1 for tax reporting
purposes. See "The Offer--Section 7. Effects of the Offer--Effect on Trading
Market; Registration Under 12(g) of the Exchange Act."
The offer is conditioned on satisfaction of certain conditions. THE
OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING TENDERED. See
"The Offer--Section 17. Conditions to the Offer," which sets forth in full the
conditions of the offer. We reserve the right (but in no event shall we be
obligated), in our reasonable discretion, to waive any or all of those
conditions. If, on or prior to the expiration date, any or all of the conditions
have not been satisfied or waived, we reserve the right to (i) decline to
purchase any of the units tendered, terminate the offer and return all tendered
units to tendering limited partners, (ii) waive all the unsatisfied conditions
and purchase, subject to the terms of the offer, any and all units validly
tendered, (iii) extend the offer and, subject to
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your withdrawal rights, retain the units that have been tendered during the
period or periods for which the offer is extended, or (iv) amend the offer. The
transfer of units will be effective July 1, 2001.
This offer is being mailed on or about August 29, 2001 to the persons
shown by your partnership's records to have been limited partners or, in the
case of units owned of record by Individual Retirement Accounts and qualified
plans, beneficial owners of units, on August 29, 2001.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
Upon the terms and subject to the conditions of the offer, we will
purchase, by accepting for payment, and will pay for, any and all units validly
tendered as promptly as practicable following the expiration date. A tendering
beneficial owner of units whose units are owned of record by an Individual
Retirement Account or other qualified plan will not receive direct payment of
the offer price; rather, payment will be made to the custodian of such account
or plan. In all cases, payment for units purchased pursuant to the offer will be
made only after timely receipt by the Information Agent of a properly completed
and duly executed acknowledgment and agreement and other documents required by
the letter of transmittal attached as Annex II. See "The Offer--Section 3.
Procedure for Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON
THE OFFER PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
We will, upon the terms and subject to the conditions of the offer,
accept for payment and pay for any and all units validly tendered, with
appropriate adjustments to avoid purchases that would violate the agreement of
limited partnership of your partnership and any relevant procedures or
regulations promulgated by the general partner. In some circumstances, we may
pay you the full offer price and accept an assignment of your right to receive
distributions and other payments and an irrevocable proxy in respect of the
units and defer, perhaps indefinitely, the transfer of ownership of the units on
the partnership books. In other circumstance we may only be able to purchase
units which, together with units previously transferred within the preceding
twelve months, do not exceed 50% of the outstanding units.
If more units than can be purchased under the partnership agreement are
validly tendered prior to the expiration date and not properly withdrawn prior
to the expiration date in accordance with the procedures specified herein, we
will, upon the terms and subject to the conditions of the offer, accept for
payment and pay for those units so tendered which do not violate the terms of
the partnership agreement, pro rata according to the number of units validly
tendered by each limited partner and not properly withdrawn on or prior to the
expiration date, with appropriate adjustments to avoid purchases of fractional
units. If the number of units validly tendered and not properly withdrawn on or
prior to the expiration date is less than or equal to the maximum number we can
purchase under the partnership agreement, we will purchase all units so tendered
and not withdrawn, upon the terms and subject to the conditions of the offer.
If proration of tendered units is required, then, subject to our
obligation under Rule 14e-1(c) under the Exchange Act to pay limited partners
the purchase price in respect of units tendered or return those units promptly
after termination or withdrawal of the offer, we do not intend to pay for any
units accepted for payment pursuant to the offer until the final proration
results are known. Notwithstanding any such delay in payment, no interest will
be paid on the offer price.
For purposes of the offer, we will be deemed to have accepted for
payment pursuant to the offer, and thereby purchased, validly tendered units,
if, as and when we give verbal or written notice to the Information Agent of our
acceptance of those units for payment pursuant to the offer. Payment for units
accepted for payment pursuant to the offer will be made through the Information
Agent, which will act as agent for tendering limited partners for the purpose of
receiving cash payments from us and transmitting cash payments to tendering
limited partners.
If any tendered units are not accepted for payment by us for any
reason, the acknowledgment and agreement with respect to such units not
purchased may be destroyed by the Information Agent or us or returned to you.
You may withdraw tendered units until the expiration date (including any
extensions). In addition, if we have not accepted units for payment by October
26, 2001, you may then withdraw any tendered units. After the expiration date,
the Information Agent may, on our behalf, retain tendered units, and those units
may not be otherwise withdrawn, if, for any reason, acceptance for payment of,
or payment for, any units tendered pursuant to
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the offer is delayed or we are unable to accept for payment, purchase or pay for
units tendered pursuant to the offer. Any such action is subject, however, to
our obligation under Rule 14e-1(c) under the Exchange Act, to pay you the offer
price in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
We reserve the right to transfer or assign, in whole or in part, to one
or more of our affiliates, the right to purchase units tendered pursuant to the
offer, but no such transfer or assignment will relieve us of our obligations
under the offer or prejudice your rights to receive payment for units validly
tendered and accepted for payment pursuant to the offer.
3. PROCEDURE FOR TENDERING UNITS.
VALID TENDER. To validly tender units pursuant to the offer, a properly
completed and duly executed acknowledgment and agreement and any other documents
required by the letter of transmittal attached as Annex II must be received by
the Information Agent, at one of its addresses set forth on the back cover of
this offer to purchase, on or prior to the expiration date. You may tender all
or any portion of your units. No alternative, conditional or contingent tenders
will be accepted.
SIGNATURE REQUIREMENTS. If the acknowledgment and agreement is signed
by the registered holder of a unit and payment is to be made directly to that
holder, then no signature guarantee is required on the acknowledgment and
agreement. Similarly, if a unit is tendered for the account of a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc. or a commercial bank, savings bank, credit union,
savings and loan association or trust company having an office, branch or agency
in the United States (each an "Eligible Institution"), no signature guarantee is
required on the acknowledgment and agreement. However, in all other cases, all
signatures on the acknowledgment and agreement must be guaranteed by an Eligible
Institution.
In order for you to tender in the offer, your units must be validly
tendered and not withdrawn on or prior to the expiration date.
THE METHOD OF DELIVERY OF THE ACKNOWLEDGMENT AND AGREEMENT AND ALL
OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing the
acknowledgment and agreement, you are irrevocably appointing us and our
designees as your proxy, in the manner set forth in the acknowledgment and
agreement and each with full power of substitution, to the fullest extent of
your rights with respect to the units tendered by you and accepted for payment
by us. Each such proxy shall be considered coupled with an interest in the
tendered units. Such appointment will be effective when, and only to the extent
that, we accept the tendered unit for payment. Upon such acceptance for payment,
all prior proxies given by you with respect to the units will, without further
action, be revoked, and no subsequent proxies may be given (and if given will
not be effective). We and our designees will, as to those units, be empowered to
exercise all voting and other rights as a limited partner as we, in our sole
discretion, may deem proper at any meeting of limited partners, by written
consent or otherwise. We reserve the right to require that, in order for units
to be deemed validly tendered, immediately upon our acceptance for payment of
the units, we must be able to exercise full voting rights with respect to the
units, including voting at any meeting of limited partners and/or limited
partners then scheduled or acting by written consent without a meeting. By
executing the acknowledgment and agreement, you agree to execute all such
documents and take such other actions as shall be reasonably required to enable
the units tendered to be voted in accordance with our directions. The proxy
granted by you to us will remain effective and be irrevocable for a period of
ten years following the termination of our offer.
By executing the acknowledgment and agreement, you also irrevocably
constitute and appoint us and our designees as your attorneys-in-fact, each with
full power of substitution, to the full extent of your rights with respect to
the units tendered by you and accepted for payment by us. Such appointment will
be effective when, and only to the extent that, we pay for your units and will
remain effective and be irrevocable for a period of ten years following the
termination of our offer. You will agree not to exercise any rights pertaining
to the tendered units without our
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prior consent. Upon such payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, we and our
designees each will have the power, among other things, (i) to transfer
ownership of such units on the partnership books maintained by your general
partner (and execute and deliver any accompanying evidences of transfer and
authenticity it may deem necessary or appropriate in connection therewith), (ii)
upon receipt by the Information Agent of the offer consideration, to become a
substituted limited partner, to receive any and all distributions made by your
partnership on or after the date on which we acquire such units, and to receive
all benefits and otherwise exercise all rights of beneficial ownership of such
units in accordance with the terms of our offer, (iii) to execute and deliver to
the general partner of your partnership a change of address form instructing the
general partner to send any and all future distributions to which we are
entitled pursuant to the terms of the offer in respect of tendered units to the
address specified in such form, and (iv) to endorse any check payable to you or
upon your order representing a distribution to which we are entitled pursuant to
the terms of our offer, in each case, in your name and on your behalf.
By executing the acknowledgment and agreement, you will irrevocably
constitute and appoint us and any of our designees as your true and lawful agent
and attorney-in-fact with respect to such units, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to withdraw any or all of such units that have been previously
tendered in response to any other tender or exchange offer, provided that the
price per unit we are offering is equal to or higher than the price per unit
being offered in the other tender or exchange offer. Such appointment is
effective upon the execution and receipt of the acknowledgment and agreement and
shall continue to be effective unless and until you validly withdraw such units
from this offer prior to the expiration date.
ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS. By executing the
acknowledgment and agreement, you will irrevocably assign to us and our assigns
all of your right, title and interest in and to any and all distributions made
by your partnership from any source and of any nature, including, without
limitation, distributions in the ordinary course, distributions from sales of
assets, distributions upon liquidation, winding-up, or dissolution, payments in
settlement of existing or future litigation, and all other distributions and
payments from and after the expiration date of our offer, in respect of the
units tendered by you and accepted for payment and thereby purchased by us. If,
after the unit is accepted for payment and purchased by us, you receive any
distribution from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up or dissolution, payments in
settlement of existing or future litigation and all other distributions and
payments, from your partnership in respect of such unit, you will agree to
forward promptly such distribution to us.
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of units pursuant to our offer will be determined by us, in our reasonable
discretion, which determination shall be final and binding on all parties. We
reserve the absolute right to reject any or all tenders of any particular unit
determined by us not to be in proper form or if the acceptance of or payment for
that unit may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive or amend any of the conditions of the offer that we are
legally permitted to waive as to the tender of any particular unit and to waive
any defect or irregularity in any tender with respect to any particular unit of
any particular limited partner. Our interpretation of the terms and conditions
of the offer (including the acknowledgment and agreement and the letter of
transmittal) will be final and binding on all parties. No tender of units will
be deemed to have been validly made unless and until all defects and
irregularities have been cured or waived. Neither we, the Information Agent, nor
any other person will be under any duty to give notification of any defects or
irregularities in the tender of any unit or will incur any liability for failure
to give any such notification.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible
application of back-up federal income tax withholding of 31% with respect to
payment of the offer price, you may have to provide us with your correct
taxpayer identification number. See the instructions to the acknowledgment and
agreement set forth in the letter of transmittal attached as Annex II and "The
Offer--Section 6. Certain Federal Income Tax Matters."
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax in
an amount equal to 10% of the amount realized on the disposition (the amount
realized is generally the offer price plus the partnership liabilities
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allocable to each unit purchased), you must certify that you are not a foreign
person if you tender units. See the instructions to the acknowledgment and
agreement set forth in the letter of transmittal attached as Annex II and "The
Offer--Section 6. Certain Federal Income Tax Matters."
TRANSFER TAXES. The amount of any transfer taxes (whether imposed on
the registered holder of units or any person) payable on account of the transfer
of units will be deducted from the purchase price unless satisfactory evidence
of the payment of such taxes or exemption therefrom is submitted.
BINDING AGREEMENT. A tender of a unit pursuant to any of the procedures
described above and the acceptance for payment of such unit will constitute a
binding agreement between the tendering limited partner and us on the terms set
forth in this offer to purchase and the related acknowledgment and agreement and
letter of transmittal.
4. WITHDRAWAL RIGHTS.
You may withdraw your tendered units at any time prior to the
expiration date, including any extensions thereof, or on or after October 26,
2001 if the units have not been previously accepted for payment.
For a withdrawal to be effective, a written notice of withdrawal must
be timely received by the Information Agent at one of its addresses set forth on
the back cover of the offer to purchase. Any such notice of withdrawal must
specify the name of the person who tendered, the number of units to be withdrawn
and the name of the registered holder of such units, if different from the
person who tendered. In addition, the notice of withdrawal must be signed by the
person who signed the acknowledgment and agreement in the same manner as the
acknowledgment and agreement was signed.
If purchase of, or payment for, a unit is delayed for any reason, or if
we are unable to purchase or pay for a unit for any reason, then, without
prejudice to our rights under the offer, tendered units may be retained by the
Information Agent; subject, however, to our obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of our
offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of our offer. However, withdrawn units may be
re-tendered at any time prior to the expiration date by following the procedures
described in "The Offer--Section 3. Procedures for Tendering Units."
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by us in our reasonable discretion,
which determination will be final and binding on all parties. Neither the
Information Agent, any other person, nor we will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT; NO SUBSEQUENT OFFERING
PERIOD.
We expressly reserve the right, in our reasonable discretion, at any
time and from time to time, (i) to extend the period of time during which our
offer is open and thereby delay acceptance for payment of, and the payment for,
any unit, (ii) to terminate the offer and not accept any units not theretofore
accepted for payment or paid for if any of the conditions to the offer are not
satisfied or if any event occurs that might reasonably be expected to result in
a failure to satisfy such conditions, (iii) upon the occurrence of any of the
conditions specified in "The Offer--Section 17. Conditions to the Offer," or any
event that might reasonably be expected to result in such occurrence, to delay
the acceptance for payment of, or payment for, any units not already accepted
for payment or paid for, and (iv) to amend our offer in any respect (including,
without limitation, by increasing or decreasing the consideration offered,
increasing or decreasing the units being sought, or both). Notice of any such
extension, termination or amendment will promptly be disseminated to you in a
manner reasonably designed to inform you of such change. In the case of an
extension of the offer, the extension may be followed by a press release or
public announcement which will be issued no later than 9:00 a.m., New York City
time, on the next business day after the scheduled expiration date of our offer,
in accordance with Rule 14e-1(d) under the Exchange Act.
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If we extend the offer, or if we delay payment for a unit (whether
before or after its acceptance for payment) or are unable to pay for a unit
pursuant to our offer for any reason, then, without prejudice to our rights
under the offer, the Information Agent may retain tendered units and those units
may not be withdrawn except to the extent tendering limited partners are
entitled to withdrawal rights as described in "The Offer--Section 4. Withdrawal
Rights;" subject, however, to our obligation, pursuant to Rule 14e-l(c) under
the Exchange Act, to pay the offer price in respect of units tendered or return
those units promptly after termination or withdrawal of the offer.
If we make a material change in the terms of our offer, or if we waive
a material condition to our offer, we will extend the offer and disseminate
additional tender offer materials to the extent required by Rules 14d-4 and
14e-1 under the Exchange Act. The minimum period during which the offer must
remain open following any material change in the terms of the offer, other than
a change in price or a change in percentage of securities sought or a change in
any dealer's soliciting fee, if any, will depend upon the facts and
circumstances, including the materiality of the change, but generally will be
five business days. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in any
dealer's soliciting fee, if any, a minimum of ten business days from the date of
such change is generally required to allow for adequate dissemination to limited
partners. Accordingly, if, prior to the expiration date, we increase (other than
increases of not more than two percent of the outstanding units) or decrease the
number of units being sought, or increase or decrease the offer price, and if
the offer is scheduled to expire at any time earlier than the tenth business day
after the date that notice of such increase or decrease is first published, sent
or given to limited partners, the offer will be extended at least until the
expiration of such ten business days. As used in the offer to purchase,
"business day" means any day other than a Saturday, Sunday or a Federal holiday,
and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York
City time.
Pursuant to Rule 14d-11 under the Exchange Act, we may provide for a
subsequent offering period in tender offers for any and all outstanding units. A
subsequent offering period is an additional period of from three to twenty
business days following the expiration date of the offer, including any
extensions, in which limited partners may continue to tender units not tendered
in the offer for the offer price. We do not plan to offer a subsequent offering
period.
6. CERTAIN FEDERAL INCOME TAX MATTERS.
The following summary is a general discussion of certain of the United
States federal income tax consequences of the offer that may be relevant to (i)
limited partners who tender some or all of their units for cash pursuant to our
offer, and (ii) limited partners who do not tender any of their units pursuant
to our offer. This discussion is based on the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), Treasury Regulations, rulings issued by
the Internal Revenue Service (the "IRS"), and judicial decisions, all as of the
date of this offer to purchase. All of the foregoing is subject to change or
alternative construction, possibly with retroactive effect, and any such change
or alternative construction could affect the continuing accuracy of this
summary. This summary is based on the assumption that your partnership is
operated in accordance with its organizational documents including its
certificate of limited partnership and agreement of limited partnership. This
summary is for general information only and does not purport to discuss all
aspects of federal income taxation which may be important to a particular person
in light of its investment or tax circumstances, or to certain types of
investors subject to special tax rules (including financial institutions,
broker-dealers, insurance companies, and, except to the extent discussed below,
tax-exempt organizations and foreign investors, as determined for United States
federal income tax purposes), nor (except as otherwise expressly indicated) does
it describe any aspect of state, local, foreign or other tax laws. This summary
assumes that the units constitute capital assets in the hands of the limited
partners (generally, property held for investment). No advance ruling has been
or will be sought from the IRS regarding any matter discussed in this offer to
purchase. Further, no opinion of counsel has been obtained with regard to the
offer.
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THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF A LIMITED PARTNER
PARTICIPATING IN THE OFFER DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT
AND INTERPRETATIONS OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX
LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU
SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF SELLING THE INTERESTS IN YOUR PARTNERSHIP
REPRESENTED BY YOUR UNITS PURSUANT TO OUR OFFER OR OF A DECISION NOT TO SELL IN
LIGHT OF YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES TO LIMITED PARTNERS TENDERING UNITS FOR CASH. You will
recognize gain or loss on a sale of a unit of limited partnership of your
partnership equal to the difference between (i) your "amount realized" on the
sale and (ii) your adjusted tax basis in the unit sold. The "amount realized"
will be equal to the sum of the amount of cash received by you for the unit sold
pursuant to the offer plus the amount of partnership liabilities allocable to
the unit (as determined under Section 752 of the Internal Revenue Code). Thus,
your taxable gain and tax liability resulting from a sale of a unit could exceed
the cash received upon such sale.
ADJUSTED TAX BASIS. If you acquired your units for cash, your initial
tax basis in such units was generally equal to your cash investment in your
partnership increased by your share of partnership liabilities at the time you
acquired such units. Your initial tax basis generally has been increased by (i)
your share of partnership income and gains, and (ii) any increases in your share
of partnership liabilities, and has been decreased (but not below zero) by (i)
your share of partnership cash distributions, (ii) any decreases in your share
of partnership liabilities, (iii) your share of partnership losses, and (iv)
your share of nondeductible partnership expenditures that are not chargeable to
capital. For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of your units, your adjusted tax basis in
your units will include your allocable share of partnership income, gain or loss
for the taxable year of disposition. If your adjusted tax basis is less than
your share of partnership liabilities (e.g., as a result of the effect of net
loss allocations and/or distributions exceeding the cost of your unit), your
gain recognized with respect to a unit pursuant to the offer will exceed the
cash proceeds realized upon the sale of such unit.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER. Except as
described below, the gain or loss recognized by you on a sale of a unit pursuant
to the offer generally will be treated as a long-term capital gain or loss if
you held the unit for more than one year. Long-term capital gains recognized by
individuals and certain other noncorporate taxpayers generally will be subject
to a maximum United States federal income tax rate of 20%. If the amount
realized with respect to a unit of limited partnership of your partnership that
is attributable to your share of "unrealized receivables" of your partnership
exceeds the tax basis attributable to those assets, such excess will be treated
as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture for certain types of property. In addition, the maximum
United States federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your units) held for more than one year is currently 25% (rather than 20%)
with respect to that portion of the gain attributable to depreciation deductions
previously taken on the property.
If you tender a unit of limited partnership interest of your
partnership in the offer, you will be allocated a share of partnership taxable
income or loss for the year of tender with respect to any units sold. You will
not receive any future distributions on units tendered on or after the date on
which such units are accepted for purchase and, accordingly, you may not receive
any distributions with respect to such accreted income. Such allocation and any
partnership cash distributions to you for that year will affect your adjusted
tax basis in your unit and, therefore, the amount of your taxable gain or loss
upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES. The passive activity loss rules of the
Internal Revenue Code limit the use of losses derived from passive activities,
which generally include investments in limited partnership interests such as
your units. An individual, as well as certain other types of investors,
generally cannot use losses from passive activities to offset nonpassive
activity income received during the taxable year. Passive losses that are
disallowed for a particular tax year are "suspended" and may be carried forward
to offset passive activity income earned by the investor in future taxable
years. In addition, such suspended losses may be claimed as a deduction, subject
to other applicable limitations, upon a taxable disposition of the investor's
interest in such activity.
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Accordingly, if your investment in your units is treated as a passive
activity, you may be able to reduce gain from the sale of your units pursuant to
the offer with passive losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on your sale,
you will generally be entitled to use your current and "suspended" passive
activity losses (if any) from your partnership and other passive sources to
offset that gain. In general, if you sell all or a portion of your units
pursuant to the offer and recognize a loss on such sale, you will be entitled to
deduct that loss currently (subject to other applicable limitations) against the
sum of your passive activity income from your partnership for that year (if any)
plus any passive activity income from other sources for that year. If you sell
all of your units pursuant to the offer, the balance of any "suspended" losses
from your partnership that were not otherwise utilized against passive activity
income as described in the two preceding sentences will generally no longer be
suspended and will generally therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. You are urged to consult your tax
advisor concerning whether, and the extent to which, you have available
"suspended" passive activity losses from your partnership or other investments
that may be used to reduce gain from the sale of units pursuant to the offer.
INFORMATION REPORTING, BACKUP WITHHOLDING AND FIRPTA. If you tender any
units, you must report the transaction by filing a statement with your United
States federal income tax return for the year of the tender which provides
certain required information to the IRS. To prevent the possible application of
back-up United States federal income tax withholding of 31% with respect to the
payment of the offer consideration, you are generally required to provide us
with your correct taxpayer identification number. See the instructions to the
acknowledgment and agreement set forth in the letter of transmittal attached as
Annex II.
Gain realized by a foreign person on the sale of a unit pursuant to the
offer will be subject to federal income tax under the Foreign Investment in Real
Property Tax Act of 1980. Under these provisions of the Internal Revenue Code,
the transferee of an interest held by a foreign person in a partnership which
owns United States real property generally is required to deduct and withhold
10% of the amount realized on the disposition. Amounts withheld would be
creditable against a foreign person's United States federal income tax liability
and, if in excess thereof, a refund could be claimed from the Internal Revenue
Service by filing a United States income tax return. See the instructions to the
acknowledgment and agreement set forth in the letter of transmittal attached as
Annex II.
TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING LIMITED
PARTNERS. Section 708 of the Internal Revenue Code provides that if there is a
sale or exchange of 50% or more of the total interest in capital and profits of
a partnership within any 12-month period, such partnership terminates for United
States federal income tax purposes. It is possible that our acquisition of units
pursuant to the offer alone or in combination with other transfers of interests
in your partnership could result in such a termination of your partnership. If
your partnership is deemed to terminate for tax purposes, the following Federal
income tax events will be deemed to occur: the terminated partnership will be
deemed to have contributed all of its assets (subject to its liabilities) to a
new partnership in exchange for an interest in the new partnership and,
immediately thereafter, the old partnership will be deemed to have distributed
interests in the new partnership to the remaining limited partners in proportion
to their respective interests in the old partnership in liquidation of the old
partnership.
You will not recognize any gain or loss upon such deemed contribution
of your partnership's assets to the new partnership or upon such deemed
distribution of interests in the new partnership, and your capital account in
your partnership will carry over to the new partnership. A termination of your
partnership for federal income tax purposes may change (and possibly shorten)
your holding period with respect to interests in your partnership that you
choose to retain. Gain recognized by you on the disposition of retained units
with a holding period of 12 months or less may be classified as short-term
capital gain and subject to taxation at ordinary income tax rates.
A termination of your partnership for federal income tax purposes may
also subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
for certain years following our offer if you do not tender all of your interests
in your partnership (thereby increasing the taxable income allocable to your
interests in your partnership each such year), but would have no effect on the
total depreciation deductions available over the useful lives of the assets of
your partnership. Additionally, upon a termination of your partnership, the
taxable year of your partnership will close for federal income tax purposes.
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7. EFFECTS OF THE OFFER.
Because the general partner of your partnership is our subsidiary, we
have control over the management of your partnership. We also own the company
that currently manages the residential property owned by your partnership. In
addition, we beneficially own 5,181, or 33.00%, of the outstanding units of your
partnership. If we are successful in acquiring more than 17.00% of the
outstanding units pursuant to this offer, we beneficially own more than 50% of
the total outstanding units. This interest, combined with our control of your
partnership's general partner, would allow us to control the outcome of all
voting decisions with respect to your partnership. Even if we acquire a lesser
number of units pursuant to this offer, we will be able to significantly
influence the outcome of all voting decisions with respect to your partnership.
In general, we will vote the units owned by us in whatever manner we deem to be
in our best interests, which may not be in the interest of other limited
partners. This could (1) prevent non-tendering limited partners from taking
action that they desire but that we oppose and (2) enable us to take action
desired by us but opposed by non-tendering limited partners. We are also
affiliated with the company that currently manages, and has managed for some
time, the property owned by your partnership. In the event that we acquire a
substantial number of units pursuant to this offer, removal of the property
manager may become more difficult or impossible.
DISTRIBUTIONS TO US. If we acquire units in the offer, we will
participate in any subsequent distributions to limited partners to the extent of
the units purchased.
PARTNERSHIP STATUS. We believe our purchase of units should not
adversely affect the issue of whether your partnership is classified as a
partnership for federal income tax purposes.
BUSINESS. Our offer will not affect the operation of the property owned
by your partnership. We will continue to control the general partner of your
partnership and the residential property manager, both of which will remain the
same. Consummation of the offer will not affect your agreement of limited
partnership, the operations of your partnership, the business and properties
owned by your partnership or any other matter relating to your partnership,
except it would result in us increasing our ownership of units. We have no
current intention of changing the fee structure for your general partner or the
manager of your partnership's residential property.
EFFECT ON TRADING MARKET; REGISTRATION UNDER 12(g) OF THE EXCHANGE ACT.
If a substantial number of units are purchased pursuant to the offer, the result
will be a reduction in the number of limited partners in your partnership. In
the case of certain kinds of equity securities, a reduction in the number of
securityholders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. In the case of your
partnership, however, there is no established public trading market for the
units and, therefore, we do not believe a reduction in the number of limited
partners will materially further restrict your ability to find purchasers for
your units through secondary market transactions.
The units are registered under Section 12(g) of the Exchange Act, which
means, among other things, that your partnership is required to file periodic
reports with the SEC and to comply with the SEC's proxy rules. We do not expect
or intend that consummation of the offer will cause the units to cease to be
registered under Section 12(g) of the Exchange Act. If the units were to be held
by fewer than 300 persons, your partnership could apply to de-register the units
under the Exchange Act. Your partnership had 1,073 limited partners as of
December 31, 2000. If units are tendered which would result in less than 320
limited partners, we will purchase no more than 99% of the units tendered by
each limited partner to assure that there are more than 300 limited partners
after the offer. See "The Offer--Section 1. Terms of the Offer; Expiration
Date."
ACCOUNTING TREATMENT. Upon consummation of the offer, we will account
for our investment in any acquired units under the purchase method of
accounting. There will be no effect on the accounting treatment of your
partnership as a result of the offer.
8. INFORMATION CONCERNING US AND CERTAIN OF OUR AFFILIATES.
GENERAL. We are AIMCO Properties, L.P., a Delaware limited partnership.
Together with our subsidiaries, we conduct substantially all of the operations
of Apartment Investment and Management Company, a Maryland corporation
("AIMCO"). AIMCO is a real estate investment trust that owns and manages
multifamily
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apartment properties throughout the United States. AIMCO's Class A Common Stock
is listed and traded on the New York Stock Exchange under the symbol "AIV." As
of June 30, 2001, we owned or managed 312,409 apartment units in 1,622
properties located in 46 states, the District of Columbia and Puerto Rico. Based
on apartment unit data compiled by the National Multi Housing Council, we
believe that we are the largest owner and manager of multi-family apartment
properties in the United States. As of June 30, 2001, we:
- owned or controlled (consolidated) 156,572 units in 575 apartment
properties;
- held an equity interest in (unconsolidated) 99,594 units in 607
apartment properties; and
- managed 56,243 units in 440 apartment properties for third party
owners and affiliates.
Our general partner is AIMCO-GP, Inc., a Delaware corporation, which is
a wholly-owned subsidiary of AIMCO. Our principal executive offices are located
at Colorado Center, Tower Two, 2000 South Colorado Boulevard, Suite 2-1000,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
The names, positions and business addresses of the directors and
executive officers of AIMCO and your general partner (which is our subsidiary),
as well as a biographical summary of the experience of such persons for the past
five years or more, are set forth on Annex I attached hereto and are
incorporated herein by reference.
We and AIMCO are both subject to the information and reporting
requirements of the Exchange Act and, in accordance therewith, file reports and
other information with the Securities and Exchange Commission relating to our
business, financial condition and other matters, including the complete
financial statements summarized below. Such reports and other information may be
inspected at the public reference facilities maintained by the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Room of the SEC in Washington, D.C. at prescribed rates. The
SEC also maintains a site on the World Wide Web at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. In addition,
information filed by AIMCO with the New York Stock Exchange may be inspected at
the offices of the New York Stock Exchange at 20 Broad Street, New York, New
York 10005.
For more information regarding AIMCO and AIMCO Properties, L.P., please
refer to our respective Annual Reports on Form 10-K for the year ended December
31, 2000 and our respective Quarterly Reports on Form 10-Q for the quarterly
period ended June 30, 2001 (particularly the management's discussion and
analysis of financial condition and results of operations) and other reports and
documents we have filed with the SEC.
Except as described in "The Offer--Section 9. Background and Reasons
for the Offer", and "The Offer--Section 11. Conflicts of Interests and
Transactions with Affiliates" and "The Offer -- Section 13. Certain Information
Concerning your Partnership--Beneficial Ownership of Interests in Your
Partnership," neither we nor, to the best of our knowledge, any of the persons
listed on Annex I attached hereto, (i) beneficially own or have a right to
acquire any units, (ii) has effected any transaction in the units in the past 60
days, or (iii) have any contract, arrangement, understanding or relationship
with any other person with respect to any securities of your partnership,
including, but not limited to, contracts, arrangements, understandings or
relationships concerning transfer or voting thereof, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against loss
or the giving or withholding of proxies. Neither we nor our affiliates intend to
tender any units beneficially owned in this offer.
SUMMARY SELECTED FINANCIAL INFORMATION FOR AIMCO PROPERTIES, L.P. The
historical financial data set forth below for AIMCO Properties, L.P. for the six
months ended June 30, 2001 and 2000 is unaudited. The historical financial data
set forth below for AIMCO Properties, L.P. for the years ended December 31,
2000, 1999 and 1998 is based on audited financial statements. This information
should be read in conjunction with such financial statements, including the
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations of the AIMCO Operating Partnership" included in the
AIMCO Properties, L.P.'s Annual Report on Form 10-K for the year ended December
31, 2000 and its Form 10-Q for the quarter ended June 30, 2001.
-14-
18
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
-----------------------------------------
2000 1999 1998
----------- ----------- -----------
(Dollars in thousands, except per unit data)
OPERATING DATA:
RENTAL PROPERTY OPERATIONS
Rental and other property revenue ................................. $ 1,051,000 $ 531,883 $ 373,963
Property operating expenses ....................................... (426,177) (213,064) (145,966)
Owned property management expenses ................................ (13,663) (1,543) (1,878)
Depreciation ...................................................... (323,321) (131,257) (83,908)
----------- ----------- -----------
Income from property operations .................................. 287,839 186,019 142,211
----------- ----------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income from affiliates .................. 49,692 37,799 19,396
Management and other expenses ..................................... (27,199) (14,897) (16,764)
General administrative expenses allocation ........................ (10,310) (2,136) (196)
Amortization of intangibles ....................................... (6,698) (14,297) (8,735)
----------- ----------- -----------
Income (loss) from service company business ....................... 5,485 6,469 (6,299)
----------- ----------- -----------
General and administrative expenses, net .......................... (7,813) (12,016) (10,336)
----------- ----------- -----------
Depreciation on rental property ................................... -- -- --
Interest expense .................................................. (269,826) (139,124) (88,208)
Interest and other income ......................................... 66,241 54,782 28,170
Equity in earnings (losses) of unconsolidated real estate
partnerships(a) ................................................ 7,618 (2,588) (2,665)
Equity in earnings (losses) of unconsolidated subsidiaries(b) ..... (2,290) (4,595) 6,284
Loss from IPLP exchange and assumption ............................ -- (684) (2,648)
Minority interest ................................................. (3,872) (5,788) (1,868)
----------- ----------- -----------
Income from operations ............................................ 83,382 82,475 64,641
Gain (loss) on disposition of properties .......................... 26,335 (1,785) 4,287
----------- ----------- -----------
Net income ........................................................ $ 109,717 $ 80,690 $ 68,928
=========== =========== ===========
BALANCE SHEET INFORMATION (end of period):
Real estate, before accumulated depreciation ...................... $ 7,012,452 $ 4,512,697 $ 2,771,169
Real estate, net of accumulated depreciation ...................... 6,099,694 4,096,705 2,543,014
Total assets ...................................................... 7,699,174 5,684,251 4,186,764
Secured notes payable ............................................. 3,258,342 1,954,259 819,331
Partnership-obligated mandatory redeemable convertible preferred
securities of a subsidiary trust .............................. 32,330 149,500 149,500
Partners' Capital ................................................ 2,831,964 2,486,889 2,153,335
OTHER INFORMATION:
Total owned or controlled properties (end of period) .............. 566 373 234
Total owned or controlled apartment units (end of period) ......... 153,872 106,148 61,672
Total equity apartment units (end of period) ...................... 111,748 133,113 171,657
Units under management (end of period) ............................ 60,669 124,201 146,034
Basic earnings (loss) per Common OP Unit .......................... $ 0.53 $ 0.39 $ 0.80
Diluted earnings (loss) per Common OP Unit ........................ $ 0.52 $ 0.38 $ 0.78
Distributions paid per Common OP Unit ............................. $ 2.80 $ 2.50 $ 2.25
Cash flows provided by operating activities ....................... $ 400,364 $ 254,380 $ 144,152
Cash flows provided by (used in) investing activities.............. $ (546,481) $ (243,078) $ (342,541)
Cash flows provided by (used in) financing activities.............. $ 201,628 $ 37,470 $ 214,133
Funds from operations(c) .......................................... $ 439,830 $ 320,434 $ 193,830
Weighted average number of OP Units outstanding ................... 69,063 63,446 47,624
<Caption>
SIX MONTHS ENDED
JUNE 30,
--------------------------
2001 2000
----------- -----------
(Dollars in thousands,
except per unit data)
OPERATING DATA:
RENTAL PROPERTY OPERATIONS
Rental and other property revenue ................................. $ 646,004 $ 482,384
Property operating expenses ....................................... (251,895) (195,404)
Owned property management expenses ................................ (6,218) (6,241)
Depreciation ...................................................... -- --
----------- -----------
Income from property operations .................................. 387,891 280,739
----------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income from affiliates .................. 97,998 22,435
Management and other expenses ..................................... (62,490) (9,378)
General administrative expenses allocation ........................ (4,176) (3,527)
Amortization of intangibles ....................................... (9,233) (3,069)
----------- -----------
Income (loss) from service company business ....................... (22,099) (6,461)
----------- -----------
General and administrative expenses, net .......................... (4,373) (5,150)
----------- -----------
Depreciation on rental property ................................... (200,604) (146,580)
Interest expense .................................................. (169,332) (122,604)
Interest and other income ......................................... 32,038 28,511
Equity in earnings (losses) of unconsolidated real estate
partnerships(a) ................................................ (9,207) 3,886
Equity in earnings (losses) of unconsolidated subsidiaries(b) ..... -- 4,472
Loss from IPLP exchange and assumption ............................ -- --
Minority interest ................................................. (10,881) (13,452)
----------- -----------
Income from operations ............................................ 47,631 36,283
Gain (loss) on disposition of properties .......................... 1,556 5,331
----------- -----------
Net income ........................................................ $ 49,187 $ 41,614
=========== ===========
BALANCE SHEET INFORMATION (end of period):
Real estate, before accumulated depreciation ...................... $ 7,798,878 $ 5,527,566
Real estate, net of accumulated depreciation ...................... 6,469,173 4,954,303
Total assets ...................................................... 8,080,980 6,336,867
Secured notes payable ............................................. 3,586,179 2,653,746
Partnership-obligated mandatory redeemable convertible preferred
securities of a subsidiary trust .............................. 25,347 149,500
Partners' Capital ................................................ 3,018,642 2,460,265
OTHER INFORMATION:
Total owned or controlled properties (end of period) .............. 575 483
Total owned or controlled apartment units (end of period) ......... 156,572 135,261
Total equity apartment units (end of period) ...................... 99,594 100,441
Units under management (end of period) ............................ 56,243 108,176
Basic earnings (loss) per Common OP Unit .......................... $ (0.05) $ 0.13
Diluted earnings (loss) per Common OP Unit ........................ $ (0.05) $ 0.13
Distributions paid per Common OP Unit ............................. $ 1.56 $ 1.40
Cash flows provided by operating activities ....................... $ 241,023 $ 150,911
Cash flows provided by (used in) investing activities.............. $ 64,563 $ (197,352)
Cash flows provided by (used in) financing activities.............. $ (327,308) $ 35,546
Funds from operations(c) .......................................... $ 262,640 $ 203,425
Weighted average number of OP Units outstanding ................... 84,051 81,948
</Table>
-15-
19
- ----------
(a) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 99,594 apartment units at June 30, 2001, in which partnerships
AIMCO Properties, L.P. owns an equity interest.
(b) Represents AIMCO Properties, L.P.'s equity in earnings of
unconsolidated subsidiaries.
(c) AIMCO Properties, L.P.'s management believes that the presentation of
funds from operations or "FFO", when considered with the financial data
determined in accordance with generally accepted accounting principles,
provides a useful measure of performance. However, FFO does not
represent cash flow and is not necessarily indicative of cash flow or
liquidity available to AIMCO Properties, L.P., nor should it be
considered as an alternative to net income or as an indicator of
operating performance. The Board of Governors of the National
Association of Real Estate Investment Trusts ("NAREIT") defines FFO as
net income (loss), computed in accordance with generally accepted
accounting principles, excluding gains and losses from debt
restructuring and sales of property, plus real estate related
depreciation and amortization (excluding amortization of financing
costs), and after adjustments for unconsolidated partnerships and joint
ventures. AIMCO Properties, L.P. calculates FFO based on the NAREIT
definition, as adjusted for the amortization of goodwill, the non-cash
deferred portion of the income tax provision for unconsolidated
subsidiaries and less the payments of distributions on preferred
limited partnership interests. AIMCO Properties, L.P.'s management
believes that presentation of FFO provides investors with
industry-accepted measurements which help facilitate an understanding
of its ability to make required dividend payments, capital expenditures
and principal payments on its debt. There can be no assurance that
AIMCO Properties, L.P.'s basis of computing FFO is comparable with that
of other REITs.
The following is a reconciliation of net income to funds from
operations:
<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ------------------------
2000 1999 1998 2001 2000
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
Net income ....................................... $ 109,717 $ 80,690 $ 68,928 $ 49,187 $ 41,614
Gain (loss) on disposition of property ........... (26,335) 1,785 (4,287) (1,556) (5,331)
Real estate depreciation, net of minority
interests ..................................... 302,109 121,084 79,869 190,756 133,725
Real estate depreciation related to
unconsolidated entities ....................... 59,360 104,754 34,765 28,867 34,563
Amortization ..................................... 12,068 36,731 26,177 9,233 4,087
Deferred taxes ................................... 154 1,763 9,215 -- 2,961
Expenses associated with convertible preferred
securities .................................... 8,869 6,832 -- 1,014 4,858
Preferred unit distributions ..................... (26,112) (33,265) (20,837) (14,861) (13,052)
---------- ---------- ---------- ---------- ----------
Funds from operations ............................ $ 439,830 $ 320,434 $ 193,830 $ 262,640 $ 203,425
========== ========== ========== ========== ==========
</Table>
9. BACKGROUND AND REASONS FOR THE OFFER.
GENERAL. We are in the business of acquiring direct and indirect
interests in apartment properties such as the properties owned by your
partnership. Our offer provides us with an opportunity to increase our ownership
-16-
20
interest in your partnership's property while providing you and other investors
with an opportunity to liquidate your current investment.
BACKGROUND. On October 1, 1998, AIMCO merged (the "Insignia Merger")
with Insignia Financial Group, Inc. ("Insignia"). As a result of the Insignia
Merger, AIMCO acquired approximately 51% of the outstanding common shares of
beneficial interest of Insignia Properties Trust ("IPT"). Through the Insignia
Merger, AIMCO also acquired a majority ownership interest in the entity that
manages the residential properties owned by your partnership. On October 31,
1998, IPT and AIMCO entered into an agreement and plan of merger, dated as of
October 1, 1998, pursuant to which IPT merged with AIMCO on February 26, 1999.
AIMCO then contributed IPT's interest in Insignia Properties L.P., IPT's
operating partnership, to AIMCO's wholly owned subsidiary, AIMCO/IPT, Inc. AIMCO
also replaced IPT as the sole general partner of Insignia Properties L.P. As a
result, the general partner of your partnership is an indirect wholly owned
subsidiary of AIMCO/IPT and the property manager is our indirect wholly owned
subsidiary. Together with its affiliates and subsidiaries, AIMCO currently
beneficially owns, in the aggregate, approximately 33.00% of your partnership's
outstanding limited partnership units.
During our negotiations with Insignia in early 1998, we decided that if
the merger with Insignia were consummated, we could also benefit from making
offers for limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia (the "Insignia Partnerships"). Such
offers would provide liquidity for the limited partners of the Insignia
Partnerships and would provide us with a larger asset and capital base and
increased diversification. While some of the Insignia Partnerships are public
partnerships and information is publicly available on such partnerships for
weighing the benefits of making a tender offer, many of the partnerships are
private partnerships and information about such partnerships comes principally
from the general partner. Our control of the general partner makes it possible
for us to obtain access to such information. Further, such control also means
that we control the operations of the partnerships and their properties.
Insignia did not propose that we conduct such tender offers; rather, we
initiated the offers on our own. As of the date of this offering, AIMCO
Properties, L.P. has made offers to several of the Insignia Partnerships,
including your partnership.
ALTERNATIVES CONSIDERED BY YOUR GENERAL PARTNER. Before we commenced
this offer, your general partner (which is our subsidiary) considered a number
of alternative transactions. The following is a brief discussion of the
advantages and disadvantages of the alternatives considered by your general
partner.
LIQUIDATION
One alternative would be for the partnership to sell its assets,
distribute the net liquidation proceeds to its partners in accordance with the
agreement of limited partnership, and thereafter dissolve. Partners would be at
liberty to use the net liquidation proceeds after taxes for investment,
business, personal or other purposes, at their option. If your partnership were
to sell its assets and liquidate, you would not need to rely upon capitalization
of income or other valuation methods to estimate the fair market value of
partnership assets. Instead, such assets would be valued through negotiations
with prospective purchasers (in many cases unrelated third parties).
However, in the opinion of your general partner, which is our
subsidiary, the present time may not be the most desirable time to sell the
residential real estate assets of your partnership in a private transaction, and
the proceeds realized from any such sale would be uncertain. Your general
partner believes it currently is in the best interest of your partnership to
continue holding its real estate assets. See "The Offer--Section 13. Certain
Information Concerning Your Partnership--Investment Objectives and Policies;
Sale or Financing of Investments."
CONTINUATION OF THE PARTNERSHIP WITHOUT THE OFFER
A second alternative would be for your partnership to continue as a
separate legal entity with its own assets and liabilities and continue to be
governed by its existing agreement of limited partnership, without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions or improved operating
performance, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property at some point in the future a more attractive
option than it is currently. The continuation of your partnership will allow you
to continue to participate in the net income and any increases in revenue of
your partnership and any net proceeds
-17-
21
from the sale of the property owned by your partnership. However, no assurance
can be given as to future operating results or as to the results of any future
attempts to sell the property owned by your partnership.
The primary disadvantage of continuing the operations of your
partnership is that you would be limited in your ability to sell your units.
Although you could sell your units to a third party, any such sale would likely
be at a discount from your pro rata share of the fair market value of the
property owned by your partnership.
ALTERNATIVE TRANSACTIONS CONSIDERED BY US. Before we decided to make
our offer, we considered a number of alternative transactions, including
purchasing your partnership's property or merging your partnership with us.
However, both of these alternatives would require a vote of all the limited
partners. If the transaction were approved, all of the limited partners,
including those who wish to continue to participate in the ownership of your
partnership's properties, would be forced to participate in the transaction. If
the transaction were not approved, all of the limited partners, including those
who would like to dispose of their investment in your partnership's property,
would be forced to retain their investment. We also considered an offer to
exchange units in your partnership for units of AIMCO Properties, L.P. However,
because of the expense and delay associated with making such an exchange offer,
we decided to make an offer for cash only. In addition, our historical
experience has been that most holders of limited partnership units, when given a
choice, prefer cash.
DETERMINATION OF OFFER PRICE. In establishing the offer price, we
principally considered:
o The partnership's annualized operating results for the first
six months of 2001, as capitalized using the direct
capitalization method;
o Prices at which the units have recently sold, to the extent
such information is available to us; and
o The absence of a liquid trading market for the units.
Our determination of the offer price was based on our review and
analysis of the foregoing information, the other financial information and the
analyses concerning the partnership summarized below.
VALUATION OF UNITS. We determined our offer price by: (i) applying a
capitalization rate to your partnership's annualized operating results for the
first six months of 2001; (ii) adjusting this value for liabilities, non-real
estate assets, and certain other costs; and (iii) determining the proceeds that
would be paid to limited partners in the event of a liquidation of your
partnership. First, we estimated the gross property value of your partnership's
property by applying a capitalization rate to the partnership's annualized
operating results for the first six months of 2001 to obtain its estimated gross
property value. We then calculated the value of the equity of your partnership
by adding to the aggregate gross property value the value of the non-real estate
assets of your partnership and deducting its liabilities and certain other
costs, including required capital expenditures, deferred maintenance and closing
costs, to derive its net equity value. Finally, using this net equity value, we
determined the proceeds that would be paid to limited partners in the event of a
liquidation of your partnership. Based on the terms of your partnership's
agreement of limited partnership, 100% of the estimated liquidation proceeds are
assumed to be distributed to limited partners. Our offer price represents the
per unit liquidation proceeds determined in this manner.
<Table>
Gross valuation of partnership properties $ 6,959,000
Plus: Cash and cash equivalents 392,473
Plus: Other partnership assets, net of security deposits 125,026
Less: Mortgage debt, including, accrued interest (5,451,551)
Less: Accounts payable and accrued expenses (13,562)
Less: Other liabilities (503,068)
-----------
Partnership valuation before taxes and certain costs 1,508,318
Less: Disposition fees 0
Less: Extraordinary capital expenditures and deferred maintenance (134,500)
Less: Closing costs (86,988)
-----------
Estimated net valuation of your partnership 1,286,831
Percentage of estimated net valuation allocated to holders of units 100.00%
-----------
Estimated net valuation of units 1,286,831
Total number of units 15,698
-----------
Estimated valuation per unit 82
===========
Cash consideration per unit 82
===========
</Table>
-18-
22
COMPARISON OF OFFER PRICE TO ALTERNATIVE CONSIDERATION. To assist
holders of units in evaluating the offer, your general partner, which is our
subsidiary, has attempted to compare the offer price against: (a) prices at
which the units have sold on the secondary market and (b) estimates of the value
of the units on a liquidation basis. The general partner of your partnership
believes that analyzing the alternatives in terms of estimated value, based upon
currently available data and, where appropriate, reasonable assumptions made in
good faith, establishes a reasonable framework for comparing alternatives. Since
the value of the consideration for alternatives to the offer is dependent upon
varying market conditions, no assurance can be given that the estimated values
reflect the range of possible values.
The results of these comparative analyses are summarized in the chart
below. You should bear in mind that some of the alternative values are based on
a variety of assumptions that have been made by us. These assumptions relate to,
among other things, the operating results, if any, since June 30, 2001 as to
income and expenses of the property, other projected amounts and the
capitalization rates that may be used by prospective buyers if your partnership
assets were to be liquidated.
In addition, these estimates are based upon certain information
available to your general partner, which is our subsidiary, or an affiliate at
the time the estimates were computed, and no assurance can be given that the
same conditions analyzed by it in arriving at the estimates of value would exist
at the time of the offer. The assumptions used have been determined by the
general partner of your partnership or an affiliate in good faith, and, where
appropriate, are based upon current and historical information regarding your
partnership and current real estate markets, and have been highlighted below to
the extent critical to the conclusions of the general partner of your
partnership. Actual results may vary from those set forth below based on
numerous factors, including interest rate fluctuations, tax law changes, supply
and demand for similar apartment properties, the manner in which your
partnership's property is sold and changes in availability of capital to finance
acquisitions of apartment properties.
Under your partnership's agreement of limited partnership, the term of
the partnership will continue until October 31, 2024, unless sooner terminated
as provided in the agreement or by law.
<Table>
<Caption>
COMPARISON TABLE PER UNIT
---------------- --------
Cash offer price................................. $ 82.00
Alternatives
Highest prior cash tender offer price...... $478.00(1)
Highest price on secondary market.......... $ N/A
Estimated liquidation proceeds............. $ 82.00
</Table>
- ----------
(1) Represents the highest price offered in our 1999-2000 tender offers.
PRIOR TENDER OFFERS.
In May 2000, we commenced a tender offer for any and all of the
outstanding units of your partnership for $478.00 per unit and on June 26, 2000,
we purchased 747 units pursuant to such offer.
In November 1999, we commenced a tender offer for any and all of the
outstanding units in your partnership for $448 per unit and on December 22,
1999, we purchased 379 units pursuant to such offer.
In our May 1999 tender offer, we offered a price of $475 per unit.
Pursuant to such offer we purchased 750 units at $475 per unit. Since such
tender offer, your partnership sold a property for $1,500,000 and paid off
indebtedness of $286,760 and distributed $1,023,197 to the limited partners.
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23
Prior to the Insignia Merger, tender offers had been made to acquire
units of your partnership. On August 13, 1998, IPT, then an affiliate of
Insignia and now our affiliate, commenced a tender offer pursuant to which it
acquired 1,323 units at a cash purchase price of $475 per unit.
We are aware that other tender offers may have been made by
unaffiliated third parties to acquire units in your partnership in exchange for
cash. We are unaware of the amounts offered, terms, tendering parties or number
of units involved in any pending tender offers.
PRICES ON SECONDARY MARKET. Secondary market sales information is not a
reliable measure of value because of the limited amount of any known trades.
Except for offers made by use and unaffiliated third parties, privately
negotiated sales and sales through intermediaries are the only means which may
be available to a limited partner to liquidate an investment in units (other
than our offer) because the units are not listed or traded on any exchange or
quoted on Nasdaq, on the Electronic Bulletin Board, or in "pink sheets."
Secondary sales activity for the units, including privately negotiated sales,
has been limited and sporadic.
Set forth below are the high and low sale prices of units for the year
ended December 31, 2000 and the six months ended June 30, 2001, as reported by
The Partnership Spectrum, which is an independent, third- party source. The
gross sales prices reported by The Partnership Spectrum do not necessarily
reflect the net sales proceeds received by sellers of units, which typically are
reduced by commissions and other secondary market transaction costs to amounts
less than the reported price. The Partnership Spectrum represents only one
source of secondary sales information, and other services may contain prices for
the units that equal or exceed the sales prices reported in The Partnership
Spectrum. We do not know whether the information compiled by The Partnership
Spectrum is accurate or complete.
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE PARTNERSHIP SPECTRUM
<Table>
<Caption>
High Low
---- ---
Six Months Ended June 30, 2001: ................... $N/A $N/A
Year Ended December 31, 2000: ..................... $N/A $N/A
</Table>
Set forth in the table below are the high and low sales prices of units
for the year ended December 31, 2000 and the six months ended June 30, 2001, as
reported by the American Partnership Board, which is an independent, third-party
source. The gross sales prices reported by American Partnership Board do not
necessarily reflect the net sales proceeds received by sellers of units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported prices. The American Partnership Board
represents one source of secondary sales information, and other services may
contain prices for units that equal or exceed the sales prices reported by the
American Partnership Board. We do not know whether the information compiled by
the American Partnership Board is accurate or complete.
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE AMERICAN PARTNERSHIP BOARD
<Table>
<Caption>
High Low
---- ---
Six Months Ended June 30, 2001: .................. $ N/A $ N/A
Year Ended December 31, 2000: .................... $ N/A $ N/A
</Table>
ESTIMATED LIQUIDATION PROCEEDS. Liquidation value is a measure of the
price at which the assets of your partnership would sell if disposed of by your
partnership in an arms-length transaction to a willing buyer that has access to
relevant information regarding the historical revenues and expenses of the
business. Your general partner, which is our subsidiary, estimated the
liquidation value of the units using the same direct capitalization method and
assumptions as we did in valuing the units for the offer price. The liquidation
analysis assumes that your partnership's property is sold to an independent
third party at the current property value, that other balance sheet assets
(excluding amortizing assets) and liabilities of your partnership are sold at
their book value, and that the net proceeds of sale are allocated to your
partners and limited partners in accordance with your partnership's agreement of
limited partnership.
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24
The liquidation analysis assumes that the assets of your partnership
are sold in a single transaction. Should the assets be liquidated over time,
even at prices equal to those projected, distributions to limited partners from
cash flow from operations might be reduced because your partnership's fixed
costs, such as general and administrative expenses, are not proportionately
reduced with the liquidation of assets. However, for simplification purposes,
the sales of the assets are assumed to occur concurrently. The liquidation
analysis assumes that the assets are disposed of in an orderly manner and are
not sold in forced or distressed in which assets might be sold at substantial
discounts to their actual fair market value.
ALLOCATION OF CONSIDERATION. We have allocated to the limited partners
the amount of the estimated net valuation of your partnership based on your
partnership's agreement of limited partnership as if your partnership were being
liquidated at the current time.
10. POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE
OFFER.
The partnership and the general partner of your partnership (which is
our subsidiary) have provided the following information for inclusion in this
Offer to Purchase:
The general partner of your partnership believes the offer price and
the structure of the transaction are fair to the limited partners. In making
such determination, the general partner considered all of the factors and
information set forth below, but did not quantify or otherwise attach particular
weight to any such factors or information:
o the offer gives you an opportunity to make an individual
decision on whether to tender your units or to continue to
hold them;
o the offer price and the method used to determine the offer
price;
o the offer price is based on an estimated value of your
partnership's property that has been determined using a method
believed to reflect the valuation by buyers in the market for
similar assets;
o prices at which the units have recently sold, to the extent
such information is available;
o the absence of an established trading market for your units;
o an analysis of possible alternative transactions, including a
property sale, or a liquidation of the partnership; and
o an evaluation of the financial condition and results of
operations of your partnership.
The general partner of your partnership is remaining neutral and makes
no recommendation as to whether you should tender or refrain from tendering your
units in the offer. Although the general partner believes our offer is fair, the
general partner also believes that you must make your own decision whether or
not to participate in any offer, based upon a number of factors, including
several factors that may be personal to you, such as your financial position,
your need or desire for liquidity, your preferences regarding the timing of when
you might wish to sell your units, other financial opportunities available to
you, and your tax position and the tax consequences to you of selling your
units.
Neither the general partner of your partnership or its affiliates
have any plans or arrangements to tender any units. Except as otherwise provided
in "The Offer--Section 12. Future Plans of the Purchaser," the general partner
does not have any present plans or proposals which relate to or would result in
an extraordinary transaction, such as a merger, reorganization or liquidation,
involving your partnership; a purchase or sale or transfer of a material amount
of your partnership's assets; or any changes in your partnership's present
capitalization, indebtedness or distribution policies. For information relating
to certain relationships between your partnership and its general partner, on
one hand, and AIMCO and its affiliates, on the other and conflicts of interests
with respect to the tender offer, see "The Offer--Section 9. Background and
Reasons for the Offer" and "The Offer--Section 11. Conflicts
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of Interests and Transactions with Affiliates." See also "The Offer--Section 9.
Background and Reasons for the Offer--Comparison to Alternative
Consideration--Prior Tender Offers" for certain information regarding
transactions in units of your partnership.
11. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. The general partner of
your partnership became a majority-owned subsidiary of AIMCO on October 1, 1998,
when AIMCO merged with Insignia. Your general partner became a wholly owned
subsidiary of AIMCO on February 26, 1999, when IPT merged with AIMCO.
Accordingly, the general partner of your partnership has substantial conflicts
of interest with respect to the offer. As a consequence of our ownership of
units, we may have incentives to seek to maximize the value of our ownership of
units, which in turn may result in a conflict for your general partner in
attempting to reconcile our interests with the interests of the other limited
partners. We desire to purchase units at a low price and you desire to sell
units at a high price. Although the general partner believes our offer is fair,
it makes no recommendation as to whether you should tender or refrain from
tendering your units. Such conflicts of interest in connection with the offer
differ from those conflicts of interest that currently exist for your
partnership. YOU ARE URGED TO READ THIS OFFER TO PURCHASE IN ITS ENTIRETY BEFORE
DECIDING WHETHER TO TENDER YOUR UNITS.
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP. We own
both the general partner of your partnership and the property manager of your
partnership's residential property. The general partner of your partnership
received total fees and reimbursements of $218,000 in 1998, $193,000 in 1999,
and $151,000 in 2000. Fees and reimbursements for the first six months of 2001
were $86,000 ($172,000 annualized). The property manager for the residential
property is entitled to receive five percent of gross receipts from the
partnership's residential property for providing property management services.
It received management fees of $140,000 in 1998, $90,000 in 1999, and $99,000 in
2000. Property management fees for the first six months of 2001 were $51,000
($102,000 annualized). We have no current intention of changing the fee
structure for your general partner or the manager of your partnership's
residential property.
COMPETITION AMONG PROPERTIES. Because AIMCO and your partnership both
invest in apartment properties, these properties may compete with one another
for tenants. Furthermore, you should bear in mind that AIMCO may acquire
properties in general market areas where your partnership properties are
located. It is believed that this concentration of properties in a general
market area will facilitate overall operations through collective advertising
efforts and other operational efficiencies. In managing AIMCO's properties, we
will attempt to reduce conflicts between competing properties by referring
prospective customers to the property considered to be most conveniently located
for the customer's needs.
FUTURE OFFERS. Although we have no current plans to conduct future
tender offers for your units, our plans may change based on future
circumstances, including tender offers made by third parties. Any such future
offers that we might make could be for consideration that is more or less than
the consideration we are currently offering.
12. FUTURE PLANS OF THE PURCHASER.
As described above under "The Offer--Section 9. Background and Reasons
for the Offer," we own the general partner and thereby control the management of
your partnership. In addition, we own the manager of your partnership's
residential property. We currently intend that, upon consummation of the offer,
we will hold the units acquired and your partnership will continue its business
and operations substantially as they are currently being conducted. The offer is
not expected to have any effect on partnership operations.
Although we have no present intention to do so, we may acquire
additional units or sell units after completion or termination of the offer. Any
acquisition may be made through private purchases, through one or more future
tender or exchange offers, by merger, consolidation or by any other means deemed
advisable. Any acquisition may be at a price higher or lower than the price to
be paid for the units purchased pursuant to this offer, and may be for cash,
limited partnership interests in AIMCO Properties, L.P. or other consideration.
We also may consider selling some or all of the units we acquire pursuant to
this offer to persons not yet determined, which may include our affiliates. We
may also buy your partnership's property, although we have no present intention
to do so.
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There can be no assurance, however, that we will initiate or complete, or will
cause your partnership to initiate or complete, any subsequent transaction
during any specific time period following the expiration of the offer or at all.
Except as set forth herein, we do not have any present plans or
proposals which relate to or would result in an extraordinary transaction, such
as a merger, reorganization or liquidation, involving your partnership; a
purchase or sale or transfer of a material amount of your partnership's assets;
any changes in composition of your partnership's senior management or personnel
or their compensation; any changes in your partnership's present capitalization,
indebtedness or distribution policy; or any other material changes in your
partnership's structure or business. We or our affiliates may loan funds to your
partnership which may be secured by your partnership's property. If any such
loans are made, upon default of such loans, we or our affiliates could seek to
foreclose on the loan and related mortgage or security interest. However, we
expect that, consistent with your general partner's fiduciary obligations, the
general partner will seek and review opportunities, including opportunities
identified by us, to engage in transactions which could benefit your
partnership, such as sales or refinancings of assets or a combination of the
partnership with one or more other entities, with the objective of seeking to
maximize returns to limited partners.
We have been advised that the possible future transactions the general
partner expects to consider on behalf of your partnership include: (i) payment
of extraordinary distributions; (ii) refinancing, reducing or increasing
existing indebtedness of the partnership; (iii) sales of assets, individually or
as part of a complete liquidation; and (iv) mergers or other consolidation
transactions involving the partnership. Any such merger or consolidation
transaction could involve other limited partnerships in which your general
partner or its affiliates serve as general partners, or a combination of the
partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of AIMCO), in any of which limited partners might receive
cash, common stock or other securities or consideration. There is no assurance,
however, as to when or whether any of the transactions referred to above might
occur. If any such transaction is effected by the partnership and financial
benefits accrue to its limited partners, we will participate in those benefits
to the extent of our ownership of units. The agreement of limited partnership
prohibits limited partners from voting on actions taken by the partnership,
unless otherwise specifically permitted therein. Limited partners may vote on a
liquidation, and if we are successful in acquiring a substantial number of units
in this offer, we will be able to significantly influence or control the outcome
of any such vote. Our primary objective in seeking to acquire the units pursuant
to the offer is not, however, to influence the vote on any particular
transaction, but rather to generate a profit on the investment represented by
those units.
13. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP.
GENERAL. HCW Pension Real Estate Fund Limited Partnership was organized
on April 30, 1984 under the laws of the Commonwealth of Massachusetts. Its
primary business is real estate ownership and related operations. Your
partnership was formed for the purpose of operating and holding real estate
properties for investment.
Your partnership's investment portfolio currently consists of one
residential apartment complex: Lewis Park Apartments, a 269-unit complex in
Carbondale, Illinois.
The general partner of your partnership is HCW General Partner Ltd., a
Texas limited partnership whose sole general partner is IH, Inc., a subsidiary
of AIMCO. IH, Inc. is the managing general partner of your partnership, which is
a wholly owned subsidiary of AIMCO. A wholly owned subsidiary of AIMCO also
serves as manager of the residential property owned by your partnership. As of
December 31, 2000, there were 15,698 units issued and outstanding, which were
held of record by 1,073 limited partners. Your partnership's principal executive
offices are located at Colorado Center, Tower Two, 2000 South Colorado
Boulevard, Suite 2-1000, Denver, Colorado 80222, telephone (303) 757-8101.
For additional information about your partnership, please refer to the
annual report prepared by your partnership which was sent to you prior to this
offer to purchase, particularly Item 2 of Form 10-KSB, which contains detailed
information regarding the properties owned, including mortgages, rental rates
and taxes.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS.
In general, your general partner (which is our subsidiary) regularly evaluates
the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors
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the property's specific locale and sub-market conditions (including stability of
the surrounding neighborhood), evaluating current trends, competition, new
construction and economic changes. It oversees the property's operating
performance and continuously evaluates the physical improvement requirements. In
addition, the financing structure for the property (including any prepayment
penalties), tax implications, availability of attractive mortgage financing to a
purchaser, and the investment climate are all considered. Any of these factors,
and possibly others, could potentially contribute to any decision by the general
partner to sell, refinance, upgrade with capital improvements or hold the
partnership property. If rental market conditions improve, the level of
distributions might increase over time. It is possible that the private resale
market for properties could improve over time, making a sale of the
partnership's property in a private transaction at some point in the future a
more viable option than it is currently. After taking into account the foregoing
considerations, your general partner is not currently seeking a sale of your
partnership's property primarily because it expects the property's operating
performance to improve in the long term. In making this assessment, your general
partner noted the occupancy and rental rates at the residential property. In
particular, the general partner noted that it expects to spend approximately
$65,000 for capital improvements at the residential property in 2001 to repair
and update the property. Although there can be no assurance as to future
performance, however, these expenditures are expected to improve the
desirability of the property to tenants. The general partner does not believe
that a sale of the property at the present time would adequately reflect the
property's future prospects. Another significant factor considered by your
general partner is the likely tax consequences of a sale of the property for
cash. Such a transaction would likely result in tax liabilities for many limited
partners.
TERM OF YOUR PARTNERSHIP. Under your partnership's agreement of limited
partnership, the term of the partnership will continue until October 31, 2024,
unless sooner terminated as provided in the agreement or by law. Limited
partners could, as an alternative to tendering their units, take a variety of
possible actions, including voting to liquidate the partnership or amending the
agreement of limited partnership to authorize limited partners to cause the
partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
CAPITAL REPLACEMENTS. Your partnership has an ongoing program of
capital improvements, replacements and renovations, including floor covering,
air conditioning unit, cabinet and appliance replacements and other replacements
and renovations in the ordinary course of business. All capital improvements and
renovation costs, which are budgeted at $65,000 for 2001, are expected to be
paid from operating cash flows, cash reserves, or from short-term or long-term
borrowings.
COMPETITION. There are other residential properties within the market
area of your partnership's properties. The number and quality of competitive
properties in such an area could have a material effect on the rental market for
the apartments at your partnership's properties and the rents that may be
charged for such apartments. While AIMCO is a significant factor in the United
States in the apartment industry, competition for apartments is local. According
to data published by the National Multi-Housing Council, we believe AIMCO is the
largest owner and manager of multifamily apartment properties in the United
States.
FINANCIAL DATA. The selected financial information of your partnership
set forth below for the years ended December 31, 2000, 1999 and 1998 is based on
audited financial statements. The selected financial information set forth below
for the six months ended June 30, 2001 and 2000 is based on unaudited financial
statements. This information should be read in conjunction with such financial
statements, including notes thereto, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations of Your Partnership" in the
Annual Report on Form 10-KSB of your partnership for the year ended December 31,
2000, and the Quarterly Report on Form 10-QSB for the quarter ended June 30,
2001.
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HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<Table>
<Caption>
FOR THE SIX MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
2001 2000 2000 1999 1998
---------- ---------- ---------- ---------- ----------
OPERATING DATA:
Total Revenues .......................................... $ 936 $ 943 $ 1,961 $ 1,824 $ 2,799
Net (Loss) Income ....................................... (83) 101 174 (3,336) 52
Net (Loss) Income per Limited Partnership Unit .......... (5.16) 6.31 10.89 (209.33) 3.25
Distributions per Limited Partnership Unit .............. 44.40 141.80 479.68 1.53 24.97
BALANCE SHEET DATA:
Cash and Cash Equivalents ............................... 392 465 1,152 2,196 1,354
Investment Property, Net of Accumulated Depreciation .... 4,900 5,339 5,149 5,593 10,232
Total Assets ............................................ 5,509 6,090 6,598 8,260 12,143
Mortgage Note Payable ................................... 5,415 -- 5,472 0 0
General Partners' Capital (Deficit) ..................... (144) (132) (139) (110) (58)
Limited Partners' Capital (Deficit) ..................... (353) 5,657 425 7,784 11,142
Partners' Capital (Deficit) ............................. (497) 5,525 286 7,674 11,084
Total Distributions ..................................... (700) (2,250) (7,562) (425) (400)
</Table>
<Table>
<Caption>
2001 2000 2000 1999 1998
---------- ---------- ---------- ---------- ----------
CASH FLOWS:
Net Increase (Decrease) in Cash and Cash Equivalents ..... (760) (1,731) (1,044) 842 273
Net Cash (Used in) Provided by Operating Activities ...... 19 544 1,234 679 199
</Table>
DESCRIPTION OF PROPERTY. The following shows the location, the date of
purchase, the nature of your partnership's ownership interest in and the use of
your partnership's property.
<Table>
<Caption>
Date of Type of
Property Purchase Ownership Use
-------- -------- --------- ---
Lewis Park Apartments 11/86 Fee ownership subject to 269-unit apartments
Carbondale, Illinois first mortgage
</Table>
ACCUMULATED DEPRECIATION SCHEDULE. The following shows the gross
carrying value, accumulated depreciation and federal tax basis of your
partnership's property as of December 31, 2000.
<Table>
<Caption>
Gross
Carrying Accumulated
Property Value Depreciation Rate Method
- -------- -------- ------------ ---- ------
(In Thousands)
Lewis Park $10,445 $5,306 5-40 S/L
</Table>
SCHEDULE OF MORTGAGES. The following shows certain information
regarding the outstanding first mortgage encumbering your partnership's property
as of December 31, 2000.
<Table>
<Caption>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31 Including Interest Period Maturity Due At
Property 2000 Interest Rate Amortized Date Maturity
- -------- ----------- -------- ------- --------- -------- --------
(In Thousands) (In Thousands)
Lewis Park $5,472 $46 8.08% 20 years 09/20 $ --
</Table>
AVERAGE RENTAL RATES AND OCCUPANCY. The following shows the average
rental rates and occupancy percentages for your partnership's property during
the periods indicated.
<Table>
<Caption>
Average Rental Rate Average Occupancy
------------------- -----------------
Property 2001* 2000 2001* 2000
---- ---- ---- ----
Lewis Park $8,424 $8,434 77% 84%
</Table>
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29
- ----------
* Annualized based on average rates as of June 30, 2001. Actual rates for
2001 could be higher or lower.
PROPERTY MANAGEMENT. Your partnership's residential property is managed
by an entity which is a wholly-owned subsidiary of AIMCO. Pursuant to the
management agreement between the property manager and your partnership, the
property manager operates your partnership's residential property, establishes
rental policies and rates and directs marketing activities. The property manager
also is responsible for maintenance, the purchase of equipment and supplies, and
the selection and engagement of all vendors, suppliers and independent
contractors.
DISTRIBUTIONS. The following table shows, for each of the years
indicated, the distributions paid per unit for such years.
<Table>
<Caption>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- ------
1998 25.00(1)
1999 1.53
2000 479.68(1)
2001 (through June 30, 2001) 44.41(2)
--------
Total $ 588.48
========
</Table>
(1) Includes proceeds of a sale of a property.
(2) Includes proceeds from a financing transaction involving the partnership's
property.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP. We share with
our affiliates, AIMCO, AIMCO-GP, Inc. and Insignia Properties, L.P., voting and
dispositive power with respect to 5,181, or 33.00%, of the outstanding units of
your partnership. Except as set forth above, neither we, nor, to the best of our
knowledge, any of our affiliates, (i) beneficially own or have a right to
acquire any units, (ii) has effected any transactions in the units in the past
60 days, or (iii) have any contract, arrangement, understanding or relationship
with any other person with respect to any securities of your partnership,
including, but not limited to, contracts, arrangements, understandings or
relationships concerning transfer or voting thereof, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against
loss, or the giving or withholding of proxies. See "The Offer - Section 9.
Background and Reasons for the Offer - Prior Tender Offers."
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES. The
following table shows, for each of the years indicated, amounts paid to your
general partner and its affiliates on a historical basis. The general partner is
reimbursed for actual direct costs and expenses incurred in connection with the
operation of the partnership. The property manager is entitled to receive fees
for transactions involving your partnership and its property and is entitled to
receive five percent of the gross receipts from the partnership's residential
property for providing property management services.
<Table>
<Caption>
PARTNERSHIP PROPERTY
YEAR FEES AND EXPENSES MANAGEMENT FEES
- ---- ----------------- ---------------
1998 $ 218,000 $ 140,000
1999 $ 193,000 $ 90,000
2000 $ 151,000 $ 99,000
2001* $ 172,000 $ 102,000
</Table>
- ----------
*Actual fees and expenses paid through June 30, 2001 have been
annualized. The actual fees and expenses for 2001 could be higher or lower.
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LEGAL PROCEEDINGS. Your partnership may be a party to a variety of
legal proceedings related to its ownership of the partnership's properties,
arising in the ordinary course of the business, which are not expected to have a
material adverse effect on your partnership.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP. Your partnership
files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document your partnership
files at the SEC's public reference rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Your partnership's SEC filings are
also available to the public at the SEC's web site at http://www.sec.gov.
14. VOTING POWER.
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our subsidiary, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units must approve certain
extraordinary transactions, including the removal of the general partner, most
amendments to the partnership agreement and the sale of all or substantially all
of your partnership's assets. If we acquire a substantial number of additional
units pursuant to this offer, we may be in a position to significantly influence
or control any vote of the limited partners.
15. SOURCE OF FUNDS.
We expect that approximately $862,394 will be required to purchase all
of the limited partnership units that we are seeking in this offer (exclusive of
fees and expenses estimated to be $15,000). For more information regarding fees
and expenses, see "The Offer--Section 19. Fees and Expenses."
We have a secured $350 million revolving credit facility with Bank of
America, Fleet National Bank (successor in interest to BankBoston, N.A.) and
First Union National Bank with a syndicate comprised of a total of nine lender
participants. AIMCO Properties, L.P. is the borrower and all obligations
thereunder are guaranteed by AIMCO and certain of its subsidiaries. The
obligations under the credit facility are secured, among other things, by our
pledge of our stock ownership in certain subsidiaries of AIMCO, a pledge of
certain options to purchase beneficial assignment interests in one entity, and a
pledge of certain of our non-real estate assets. The annual interest rate under
the credit facility is based on either LIBOR or a base rate which is the higher
of Bank of America's reference rate or 0.5% over the federal funds rate, plus,
in either case, an applicable margin. The margin ranges between 2.05% and 2.55%
in the case of LIBOR-based loans and between 0.55% and 1.05% in the case of base
rate loans, based upon a fixed charge coverage ratio. The credit facility
expires in July 2002.
We are concurrently making offers to acquire interests in other limited
partnerships. We believe that we will have sufficient cash on hand and available
sources of financing to acquire all units tendered pursuant to the offer. As of
June 30, 2001, we had $40.7 million of cash on hand and $167 million available
for borrowing under existing lines of credit. We intend to repay any amounts
borrowed to finance the offer out of future working capital.
16. DISSENTERS' RIGHTS.
Neither the agreement of limited partnership of your partnership nor
applicable law provides any right for you to have your units appraised or
redeemed in connection with, or as a result of, our offer. You have the
opportunity to make an individual decision on whether or not to tender your
units in the offer.
17. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of our offer, we will not be
required to accept for payment and pay for any units tendered pursuant to our
offer, may postpone the purchase of, and payment for, units tendered, and may
terminate or amend our offer if at any time on or after the date of this offer
to purchase and at or before the expiration of our offer (including any
extension thereof), any of the following shall occur or may be reasonably
expected to occur:
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o any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in
the business, properties, assets, liabilities, indebtedness,
capitalization, condition (financial or otherwise),
operations, licenses or franchises, management contract, or
results of operations or prospects of your partnership or
local markets in which your partnership owns property,
including any fire, flood, natural disaster, casualty loss, or
act of God that, in our reasonable judgment, are or may be
materially adverse to your partnership or the value of the
units to us, or we shall have become aware of any facts
relating to your partnership, its indebtedness or its
operations which, in our reasonable judgment, has or may have
material significance with respect to the value of your
partnership or the value of the units to us; or
o there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any
national securities exchange or the over-the-counter market in
the United States, (ii) a decline in the closing price of a
share of AIMCO's Class A Common Stock of more than 5.0% from
the date hereof, (iii) any extraordinary or material adverse
change in the financial, real estate or money markets or major
equity security indices in the United States such that there
shall have occurred at least a 25 basis point increase in
LIBOR, or at least a 5.0% decrease in the price of the 10-year
Treasury Bond or the 30-year Treasury Bond, or at least a 5.0%
decrease in the S&P 500 Index or the Morgan Stanley REIT
Index, in each case from the date hereof, (iv) any material
adverse change in the commercial mortgage financing markets,
(v) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (not
existing on the date hereof), (vi) a commencement of a war,
conflict, armed hostilities or other national or international
calamity directly or indirectly involving the United States
(not existing on the date hereof), (vii) any limitation
(whether or not mandatory) by any governmental authority on,
or any other event which, in our reasonable judgment, might
affect the extension of credit by banks or other lending
institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in our
reasonable judgment, a material acceleration or worsening
thereof; or
o there shall have been threatened, instituted or pending any
action, proceeding, application or counterclaim by any
Federal, state, local or foreign government, governmental
authority or governmental agency, or by any other person,
before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i)
challenges or seeks to challenge our purchase of the units,
restrains, prohibits or delays the making or consummation of
our offer, prohibits the performance of any of the contracts
or other arrangements entered into by us (or any affiliates of
ours), or seeks to obtain any material amount of damages as a
result of the transactions contemplated by our offer, (ii)
seeks to make the purchase of, or payment for, some or all of
the units pursuant to our offer illegal or results in a delay
in our ability to accept for payment or pay for some or all of
the units, (iii) seeks to prohibit or limit the ownership or
operation by us or any of our affiliates of the entity serving
as general partner of your partnership or to remove such
entity as general partner of your partnership, or seeks to
impose any material limitation on our ability or the ability
of any affiliate of ours to conduct your partnership's
business or own such assets, (iv) seeks to impose material
limitations on our ability to acquire or hold or to exercise
full rights of ownership of the units including, but not
limited to, the right to vote the units purchased by us on all
matters properly presented to the limited partners, or (v)
might result, in our reasonable judgment, in a diminution in
the value of your partnership or a limitation of the benefits
expected to be derived by us as a result of the transactions
contemplated by our offer or the value of the units to us; or
o there shall be any action taken, or any statute, rule,
regulation, order or injunction shall be sought, proposed,
enacted, promulgated, entered, enforced or deemed applicable
to our offer, your partnership, any general partner of your
partnership, us or any affiliate of ours or your partnership,
or any other action shall have been taken, proposed or
threatened, by any government, governmental authority or
court, that, in our reasonable judgment, might, directly or
indirectly, result in any of the consequences referred to in
clauses (i) through (v) of the immediately preceding
paragraph; or
o your partnership shall have (i) changed, or authorized a
change of, the units or your partnership's capitalization,
(ii) issued, distributed, sold or pledged, or authorized,
proposed or announced the
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issuance, distribution, sale or pledge of (A) any equity
interests (including, without limitation, units), or
securities convertible into any such equity interests or any
rights, warrants or options to acquire any such equity
interests or convertible securities, or (B) any other
securities in respect of, in lieu of, or in substitution for
units outstanding on the date hereof, (iii) purchased or
otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities,
(iv) declared or paid any dividend or distribution on any
units or issued, authorized, recommended or proposed the
issuance of any other distribution in respect of the units,
whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement,
or intention to enter into an agreement, with respect to any
merger, consolidation, liquidation or business combination,
any acquisition or disposition of a material amount of assets
or securities, or any release or relinquishment of any
material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to
implement such a transaction previously authorized,
recommended, proposed or publicly announced, (vii) issued, or
announced its intention to issue, any debt securities, or
securities convertible into, or rights, warrants or options to
acquire, any debt securities, or incurred, or announced its
intention to incur, any debt other than in the ordinary course
of business and consistent with past practice, (viii)
authorized, recommended or proposed, or entered into, any
transaction which, in our reasonable judgment, has or could
have an adverse affect on the value of your partnership or the
units, (ix) proposed, adopted or authorized any amendment of
its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions or (xi) been
notified that any debt of your partnership or any of its
subsidiaries secured by any of its or their assets is in
default or has been accelerated; or
o a tender or exchange offer for any units shall have been
commenced or publicly proposed to be made by another person or
"group" (as defined in Section 13(d)(3) of the Exchange Act)
or it shall have been publicly disclosed or we shall have
otherwise learned that (i) any person or group shall have
acquired or proposed or be attempting to acquire beneficial
ownership of more than five percent of the units, or shall
have been granted any option, warrant or right, conditional or
otherwise, to acquire beneficial ownership of more than five
percent of the units, other than acquisitions for bona fide
arbitrage purposes, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in
principle or made a proposal with respect to a merger,
consolidation or other business combination with or involving
your partnership; or
o the offer to purchase may have an adverse effect on AIMCO's
status as a REIT; or
o we shall not have adequate cash or financing commitments
available to pay the for the units validly tendered.
The foregoing conditions are for our sole benefit and may be asserted
by us regardless of the circumstances giving rise to such conditions or may be
waived by us in whole or in part at any time and from time to time in our
reasonable discretion. The failure by us at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to any particular facts or circumstances shall not
be deemed a waiver with respect to any other facts or circumstances and each
right shall be deemed a continuing right which may be asserted at any time and
from time to time.
18. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 18, we are not, based on
information provided by your general partner (which is our subsidiary), aware of
any licenses or regulatory permits that would be material to the business of
your partnership, taken as a whole, and that might be adversely affected by our
acquisition of units as contemplated herein, or any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of units by us pursuant to the offer, other than the filing of a
Tender Offer Statement on Schedule TO with the SEC (which has already been
filed) and any required amendments thereto. While there is no present intent to
delay the purchase of units tendered pursuant to the offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to your partnership or its business, or that
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33
certain parts of its business might not have to be disposed of or other
substantial conditions complied with in order to obtain such approval or action,
any of which could cause us to elect to terminate the offer without purchasing
units thereunder. Our obligation to purchase and pay for units is subject to
certain conditions, including conditions related to the legal matters discussed
in this Section 18.
ANTITRUST. We do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of units
contemplated by our offer.
MARGIN REQUIREMENTS. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to our offer.
STATE LAWS. We are not aware of any jurisdiction in which the making of
our offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
If, after such good faith effort, we cannot comply with any such law, the offer
will not be made to (nor will tenders be accepted from or on behalf of) limited
partners residing in such jurisdiction. In those jurisdictions with securities
or blue sky laws that require the offer to be made by a licensed broker or
dealer, the offer shall be made on behalf of us, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
19. FEES AND EXPENSES.
Except as set forth herein, we will not pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of units pursuant to
the offer. We have retained River Oaks Partnership Services, Inc. to act as
Information Agent in connection with our offer. The Information Agent may
contact holders of units by mail, e-mail, telephone, telex, telegraph and
personal interview and may request brokers, dealers and other nominee limited
partners to forward materials relating to the offer to beneficial owners of the
units. We will pay the Information Agent reasonable and customary compensation
for its services in connection with the offer, plus reimbursement for
out-of-pocket expenses, and will indemnify it against certain liabilities and
expenses in connection therewith, including liabilities under the Federal
securities laws. We will also pay all costs and expenses of printing and mailing
the offer and any related legal fees and expenses.
----------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF US NOT CONTAINED HEREIN, IN THE ACKNOWLEDGMENT AND
AGREEMENT OR THE LETTER OF TRANSMITTAL ATTACHED AS ANNEX II AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
We have filed with the SEC a Tender Offer Statement on Schedule TO,
pursuant to Sections 13(e)(4), 14(d)(1) and Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to our offer, and may
file amendments thereto. Your partnership has filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to Section
14(d)(4) and Rule 14d-9 under the Exchange Act, furnishing certain additional
information about your partnership's and the general partner's position
concerning our offer, and your partnership may file amendments thereto. The
Schedules TO and 14D-9 and any amendments to either Schedule, including
exhibits, may be inspected and copies may be obtained at the same place and in
the same manner as described in "The Offer-Section 13. Certain Information
Concerning Your Partnership--Additional Information Concerning Your
Partnership."
The acknowledgment and agreement and any other required documents
should be sent or delivered by each limited partner or such limited partner's
broker, dealer, bank, trust company or other nominee to the Information Agent at
one of its addresses set forth below.
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THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<Table>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
P.O. BOX 2065 111 COMMERCE ROAD 111 COMMERCE ROAD
S. HACKENSACK, NJ 07606-2065 CARLSTADT, NJ 07072 CARLSTADT, NJ 07072
ATTN: REORGANIZATION DEPT. ATTN: REORGANIZATION DEPT.
FOR INFORMATION, PLEASE CALL:
TOLL FREE: (888) 349-2005
</Table>
ANNEX I
OFFICERS AND DIRECTORS
The names and positions of the executive officers of Apartment
Investment and Management Company ("AIMCO"); AIMCO-GP, Inc. ("AIMCO-GP") and the
general partner of your partnership are set forth below. The directors of AIMCO
are also set forth below. The two directors of AIMCO-GP are Terry Considine and
Peter Kompaniez. The two directors of the general partner of your partnership
are Peter K. Kompaniez and Patrick J. Foye. Unless otherwise indicated, the
business address of each executive officer and director is 2000 South Colorado
Boulevard, Suite 2-1000, Denver, Colorado 80222-7900. Each executive officer and
director is a citizen of the United States of America.
<Table>
<Caption>
NAME POSITION
---- --------
Terry Considine.......................... Chairman of the Board of Directors and Chief Executive Officer
Peter K. Kompaniez....................... Vice Chairman, President and Director
Harry G. Alcock.......................... Executive Vice President and Chief Investment Officer
Joel F. Bonder........................... Executive Vice President, General Counsel and Secretary
Joseph DeTuno............................ Executive Vice President - Redevelopment
Patrick J. Foye.......................... Executive Vice President
Lance J. Graber.......................... Executive Vice President - Acquisitions
Steven D. Ira............................ Co-Founder and Executive Vice President
Paul J. McAuliffe........................ Executive Vice President and Chief Financial Officer
Ron Monson............................... Executive Vice President and Head of Property Operations
James N. Bailey.......................... Director
Richard S. Ellwood....................... Director
J. Landis Martin......................... Director
Thomas L. Rhodes......................... Director
</Table>
<Table>
<Caption>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
Terry Considine........................... Mr. Considine has been Chairman and Chief Executive
Officer of AIMCO and AIMCO-GP since July 1994. Mr.
Considine serves as Chairman of the Board of
Directors of American Land Lease, Inc. (formerly
Asset Investors Corporation and Commercial Asset
Investors, Inc.), another public real estate
investment trust. Mr. Considine has been and remains
involved as a principal in a variety of other
business activities.
</Table>
35
<Table>
Peter K. Kompaniez..................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO since July 1994 and
was appointed President in July 1997. Mr. Kompaniez has also served as Chief
Operating Officer of NHP Incorporated, which was acquired by AIMCO in December
1997. From 1986 to 1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding company for Heron
International, N.V.'s real estate and related assets. While at HFC, Mr.
Kompaniez administered the acquisition, development and disposition of
approximately 8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of commercial real estate.
Harry G. Alcock........................ Mr. Alcock served as a Vice President of AIMCO from July 1996 to October 1997,
when he was promoted to Senior Vice President - Acquisitions. Mr. Alcock served
as Senior Vice President-Acquisitions until October 1999, when he was promoted
to Executive Vice President and Chief Investment Officer. Mr. Alcock has held
responsibility for AIMCO's acquisition and financing activities since July 1994.
From June 1992 until July 1994, Mr. Alcock served as Senior Financial Analyst
for PDI and HFC. From 1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles-based real estate developer, with responsibility for
raising debt and joint venture equity to fund land acquisition and development.
From 1987 to 1988, Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Joel F. Bonder......................... Mr. Bonder was appointed Executive Vice President, General Counsel and Secretary
of AIMCO effective December 1997. Prior to joining AIMCO, Mr. Bonder served as
Senior Vice President and General Counsel of NHP from April 1994 until December
1997. Mr. Bonder served as Vice President and Deputy General Counsel of NHP from
June 1991 to March 1994 and as Associate General Counsel of NHP Incorporated
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with the Washington, D.C.
law firm of Lane & Edson, P.C. From 1979 to 1983, Mr. Bonder practiced with the
Chicago law firm of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington University School of Law.
Patrick J. Foye........................ Mr. Foye was appointed Executive Vice President of AIMCO in May 1998. He is
responsible for acquisitions of partnership securities, consolidation of
minority interests, and corporate and other acquisitions. Prior to joining
AIMCO, Mr. Foye was a merger and acquisitions partner in the law firm of
Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through
1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and
serves as a member of the New York State Privatization Council. He received a
B.A. from Fordham College and a J.D. from Fordham University Law School and was
Associate Editor of the Fordham Law Review.
</Table>
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<Table>
Joseph DeTuno.......................... Mr. DeTuno was appointed Executive Vice President-Redevelopment of AIMCO in
February 2001. Mr. DeTuno has been Senior Vice President-Property Redevelopment
of AIMCO since August 1997. Mr. DeTuno was previously President and founder of
JD Associates, his own full service real estate consulting, advisory and project
management company that he founded in 1990.
Lance Graber........................... Mr. Graber was appointed Executive Vice President - Acquisitions in October
1999. His principal business function is acquisitions. Prior to joining AIMCO,
Mr. Graber was an Associate from 1991 through 1992 and then a Vice President
from 1992 through 1994 at Credit Suisse First Boston engaged in real estate
financial advisory services and principal investing. He was a Director there
from 1994 to May 1999, during which time he supervised a staff of seven in the
making of principal investments in hotel, multi-family and assisted living
properties. Mr. Graber received a B.S. and an M.B.A. from the Wharton School of
the University of Pennsylvania.
Steven D. Ira.......................... Mr. Ira is a Co-Founder of AIMCO and has served as Executive Vice President -
Property Operations of AIMCO since July 1994. From 1987 until July 1994, he
served as President of Property Asset Management ("PAM"). Prior to merging his
firm with PAM in 1987, Mr. Ira acquired extensive experience in property
management. Between 1977 and 1981 he supervised the property management of over
3,000 apartment and mobile home units in Colorado, Michigan, Pennsylvania and
Florida, and in 1981 he joined with others to form the property management firm
of McDermott, Stein and Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former president of both the
National Apartment Association and the Colorado Apartment Association. Mr. Ira
is the sixth individual elected to the Hall of Fame of the National Apartment
Association in its 54-year history. He holds a Certified Apartment Property
Supervisor (CAPS) and a Certified Apartment Manager designation from the
National Apartment Association, a Certified Property Manager (CPM) designation
from the National Institute of Real Estate Management (IREM) and he is a member
of the Board of Directors of the National Multi-Housing Council, the National
Apartment Association and the Apartment Association of Greater Orlando. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
</Table>
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<Table>
Paul J. McAuliffe...................... Mr. McAuliffe has been Executive Vice President of AIMCO since February 1999 and
was appointed Chief Financial Officer in October 1999. Prior to joining AIMCO,
Mr. McAuliffe was Senior Managing Director of Secured Capital Corporation and
prior to that time had been a Managing Director of Smith Barney, Inc. from 1993
to 1996, where he was a key member of the underwriting team that led AIMCO's
initial public offering in 1994. Mr. McAuliffe was also a Managing Director and
head of the real estate group at CS First Boston from 1990 to 1993 and he was a
Principal in the real estate group at Morgan Stanley & Co., Inc. from 1983 to
1990. Mr. McAuliffe received a B.A. from Columbia College and an MBA from
University of Virginia, Darden School.
Ron Monson............................. Mr. Monson was appointed Executive Vice President and Head of Property
Operations of AIMCO on February 6, 2001. Mr. Monson has been with AIMCO since
1997 and was promoted to Divisional Vice President in 1998. Prior to joining
AIMCO, Mr. Monson worked for 13 years in operations management positions in the
lawn care and landscaping industries, principally with True Green/Chemlawn. Mr.
Monson received a Bachelor of Science from the University of Minnesota and a
Masters in Business Administration from Georgia State University.
James N. Bailey........................ Mr. Bailey was appointed a Director of AIMCO in June 2000. In 1973, Mr. Bailey
Cambridge Associates, Inc. co-founded Cambridge Associates, Inc., which is an investment consulting firm
1 Winthrop Square, for non-profit institutions and wealthy family groups. He is also Co-Founder,
Suite 500 Treasurer and Director of The Plymouth Rock Company, Direct Response Corporation
Boston, MA 02110 and Homeowners' Direct Corporation, each of which is a United States personal
lines insurance company. He received his M.B.A. and J.D. degrees in 1973 from
Harvard Business School and Harvard Law School.
Richard S. Ellwood..................... Mr. Ellwood was appointed a Director of AIMCO in July 1994 and is currently
12 Auldwood Lane Chairman of the Audit Committee and a member of the Compensation Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co., Incorporated, a real
estate investment banking firm. Prior to forming R.S. Ellwood & Co.,
Incorporated in 1987, Mr. Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior banker at Merrill
Lynch Capital Markets from 1984 to 1987; Managing Director at Warburg Paribas
Becker from 1978 to 1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in various capacities at
J.P. Morgan & Co. from 1955 to 1968. Mr. Ellwood currently serves as a director
of Felcor Lodging Trust, Incorporated and Florida East Coast Industries, Inc.
</Table>
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<Table>
J. Landis Martin....................... Mr. Martin was appointed a director of AIMCO in July 1994 and became Chairman of
199 Broadway the Compensation Committee on March 19, 1998. Mr. Martin is a member of the
Suite 4300 Audit Committee. Mr. Martin has served as President and Chief Executive Officer
Denver, CO 80202 of NL Industries, Inc., a manufacturer of titanium dioxide, since 1987. Mr.
Martin has served as Chairman of Tremont Corporation ("Tremont"), a holding
company operating though its affiliates Titanium Metals Corporation ("TIMET")
and NL Industries, Inc. ("NL"), since 1990 and as Chief Executive Officer and a
director of Tremont since 1988. Mr. Martin has served as Chairman of TIMET, an
integrated producer of titanium, since 1987 and Chief Executive Officer since
January 1995. From 1990 until its acquisition by a predecessor of Halliburton
Company ("Halliburton") in 1994, Mr. Martin served as Chairman of the Board and
Chief Executive Officer of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director of Halliburton,
which is engaged in the petroleum services, hydrocarbon and engineering
industries, and Crown Castle International Corporation, a communications
company.
Thomas L. Rhodes....................... Mr. Rhodes was appointed a Director of AIMCO in July 1994 and is a member of the
215 Lexington Avenue Audit and Compensation Committees. Mr. Rhodes has served as the President and a
4th Floor Director of National Review magazine since November 1992, where he has also
New York, NY 10016 served as a Director since 1998. From 1976 to 1992, he held various positions at
Goldman, Sachs & Co. and was elected a General Partner in 1986 and served as a
General Partner from 1987 until November 1992. He is currently Co-Chairman of
the Board, Co-Chief Executive Officer and a Director of American Land Lease,
Inc. He also serves as a Director of Delphi Financial Group and its
subsidiaries, Delphi International Ltd., Oracle Reinsurance Company and the
Lynde and Harry Bradley Foundation.
</Table>
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ANNEX II
LETTER OF TRANSMITTAL
TO TENDER UNITS OF LIMITED PARTNERSHIP INTEREST IN
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP (THE "PARTNERSHIP")
PURSUANT TO AN OFFER TO PURCHASE
DATED AUGUST 29, 2001 (THE "OFFER DATE")
BY
AIMCO PROPERTIES, L.P.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK TIME,
ON SEPTEMBER 27, 2001, UNLESS EXTENDED (AS EXTENDED FROM TIME TO TIME,
THE "EXPIRATION DATE")
- --------------------------------------------------------------------------------
TO PARTICIPATE IN THE OFFER, YOU MUST SEND A DULY COMPLETED AND EXECUTED COPY OF
THE ENCLOSED ACKNOWLEDGMENT AND AGREEMENT AND ANY OTHER DOCUMENTS REQUIRED BY
THIS LETTER OF TRANSMITTAL SO THAT SUCH DOCUMENTS ARE RECEIVED BY RIVER OAKS
PARTNERSHIP SERVICES, INC., THE INFORMATION AGENT, ON OR PRIOR TO THE EXPIRATION
DATE, UNLESS EXTENDED. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. DELIVERY OF
THE ACKNOWLEDGMENT AND AGREEMENT OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS
OTHER THAN AS SET FORTH BELOW DOES NOT CONSTITUTE VALID DELIVERY.
----------
IF YOU HAVE THE CERTIFICATE ORIGINALLY ISSUED TO REPRESENT YOUR
INTEREST IN THE PARTNERSHIP, PLEASE SEND IT TO THE INFORMATION
AGENT WITH THE ACKNOWLEDGMENT AND AGREEMENT.
----------
FOR INFORMATION OR ASSISTANCE IN CONNECTION WITH THE OFFER OR THE
COMPLETION OF THE ACKNOWLEDGMENT AND AGREEMENT, PLEASE CONTACT THE INFORMATION
AGENT AT (888) 349-2005 (TOLL FREE).
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<Table>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
By Telephone:
TOLL FREE: (888) 349-2005
</Table>
NOTE: PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THE ACKNOWLEDGMENT AND AGREEMENT IS COMPLETED.
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Ladies and Gentlemen:
The Signatory (the "Signatory") executing the Acknowledgment and Agreement
relating to the captioned offer (the "Acknowledgment and Agreement"), which is
enclosed, upon the terms and subject to the conditions set forth in the Offer,
hereby and thereby tenders to the Purchaser the units set forth in the box
entitled "Description of Units Tendered" on the Acknowledgment and Agreement,
including all interests represented by such units (collectively, the "Units"),
at the consideration indicated in the Offer as supplemented or amended.
Capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed thereto in such Acknowledgment and Agreement.
Subject to and effective upon acceptance for consideration of any of the
Units tendered hereby and thereby in accordance with the terms of the Offer, the
Signatory hereby and thereby irrevocably sells, assigns, transfers, conveys and
delivers to, or upon the order of, the Purchaser all right, title and interest
in and to such Units tendered hereby and thereby that are accepted for payment
pursuant to the Offer, including, without limitation, (i) all of the Signatory's
interest in the capital of the Partnership, and the Signatory's interest in all
profits, losses and distributions of any kind to which the Signatory shall at
any time be entitled in respect of the Units, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up, or dissolution, payments in
settlement of existing or future litigation, and all other distributions and
payments from and after the Expiration Date, in respect of the Units tendered by
the Signatory and accepted for payment and thereby purchased by the Purchaser;
(ii) all other payments, if any, due or to become due to the Signatory in
respect of the Units, under or arising out of the agreement and certificate of
limited partnership of the Partnership (the "Partnership Agreement"), or any
agreement pursuant to which the Units were sold (the "Purchase Agreement"),
whether as contractual obligations, damages, insurance proceeds, condemnation
awards or otherwise; (iii) all of the Signatory's claims, rights, powers,
privileges, authority, options, security interests, liens and remedies, if any,
under or arising out of the Partnership Agreement or Purchase Agreement or the
Signatory's ownership of the Units, including, without limitation, any and all
voting rights, rights of first offer, first refusal or similar rights, and
rights to be substituted as a limited partner of the Partnership; and (iv) all
present and future claims, if any, of the Signatory against the Partnership, the
other partners and limited partners of the Partnership, or the general
partner(s) and any affiliates thereof, under or arising out of the Partnership
Agreement, the Purchase Agreement, the Signatory's status as a limited partner,
or the terms or conditions of the Offer, for monies loaned or advanced, for
services rendered, for the management of the Partnership or otherwise.
NOTWITHSTANDING ANY PROVISION IN THE PARTNERSHIP AGREEMENT OR ANY PURCHASE
AGREEMENT TO THE CONTRARY, THE SIGNATORY HEREBY AND THEREBY DIRECTS EACH GENERAL
PARTNER OF THE PARTNERSHIP TO MAKE ALL DISTRIBUTIONS AFTER THE PURCHASER ACCEPTS
THE TENDERED UNITS FOR PAYMENT TO THE PURCHASER OR ITS DESIGNEE. Subject to and
effective upon acceptance for payment of any Unit tendered hereby and thereby,
the Signatory hereby requests that the Purchaser be admitted to the Partnership
as a limited partner under the terms of the Partnership Agreement. Upon request,
the Signatory will execute and deliver additional documents deemed by the
Information Agent or the Purchaser to be necessary or desirable to complete the
assignment, transfer and purchase of Units tendered hereby and thereby and will
hold any distributions received from the Partnership after the Expiration Date
in trust for the benefit of the Purchaser and, if necessary, will promptly
forward to the Purchaser any such distributions immediately upon receipt. The
Purchaser reserves the right to transfer or assign, in whole or in part, from
time to time, to one or more of its affiliates, the right to purchase Units
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the rights
of tendering limited partners to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
By executing the enclosed Acknowledgment and Agreement, the Signatory
represents that either (i) the Signatory is not a plan subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or
an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section
2510.3-101 of any such plan, or (ii) the tender and acceptance of Units pursuant
to the Offer will not result in a nonexempt prohibited transaction under Section
406 of ERISA or Section 4975 of the Code.
The Signatory understands that a tender of Units to the Purchaser will
constitute a binding agreement between the Signatory and the Purchaser upon the
terms and subject to the conditions of the Offer. The Signatory recognizes that
under certain circumstances set forth in the Offer, the Purchaser may not be
required to accept for consideration any or all of the Units tendered hereby. In
such event, the Signatory understands that any Acknowledgment and
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Agreement for Units not accepted for payment may be returned to the Signatory or
destroyed by the Purchaser (or its agent). THIS TENDER IS IRREVOCABLE, EXCEPT
THAT UNITS TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO
THE EXPIRATION DATE OR ON OR AFTER OCTOBER 26, 2001 IF UNITS VALIDLY TENDERED
HAVE NOT BEEN ACCEPTED FOR PAYMENT.
THE SIGNATORY HAS BEEN ADVISED THAT THE PURCHASER IS AN AFFILIATE OF THE
GENERAL PARTNER OF THE PARTNERSHIP AND THE GENERAL PARTNER DOES NOT MAKE ANY
RECOMMENDATION AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING UNITS IN THE
OFFER. THE SIGNATORY HAS MADE HIS OR HER OWN DECISION TO TENDER UNITS.
The Signatory hereby and thereby represents and warrants for the benefit of
the Partnership and the Purchaser that the Signatory owns the Units tendered
hereby and thereby and has full power and authority and has taken all necessary
action to validly tender, sell, assign, transfer, convey and deliver the Units
tendered hereby and thereby and that when the same are accepted for payment by
the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale or
transfer thereof, and such Units will not be subject to any adverse claims and
that the transfer and assignment contemplated herein and therein are in
compliance with all applicable laws and regulations.
All authority herein or therein conferred or agreed to be conferred shall
survive the death or incapacity of the Signatory, and any obligations of the
Signatory shall be binding upon the heirs, personal representatives, trustees in
bankruptcy, legal representatives, and successors and assigns of the Signatory.
The Signatory represents and warrants that, to the extent a certificate
evidencing the Units tendered hereby and thereby (the "original certificate") is
not delivered by the Signatory together with the Acknowledgment and Agreement,
(i) the Signatory represents and warrants to the Purchaser that the Signatory
has not sold, transferred, conveyed, assigned, pledged, deposited or otherwise
disposed of any portion of the Units, (ii) the Signatory has caused a diligent
search of its records to be taken and has been unable to locate the original
certificate, (iii) if the Signatory shall find or recover the original
certificate evidencing the Units, the Signatory will immediately and without
consideration surrender it to the Purchaser; and (iv) the Signatory shall at all
times indemnify, defend, and save harmless the Purchaser and the Partnership,
its successors, and its assigns from and against any and all claims, actions,
and suits, whether groundless or otherwise, and from and against any and all
liabilities, losses, damages, judgments, costs, charges, counsel fees, and other
expenses of every nature and character by reason of honoring or refusing to
honor the original certificate when presented by or on behalf of a holder in due
course of a holder appearing to or believed by the Partnership to be such, or by
issuance or delivery of a replacement certificate, or the making of any payment,
delivery, or credit in respect of the original certificate without surrender
thereof, or in respect of the replacement certificate.
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INSTRUCTIONS FOR COMPLETING THE ACKNOWLEDGMENT AND AGREEMENT
1. REQUIREMENTS OF TENDER. To be effective, a duly completed and signed
Acknowledgment and Agreement (or facsimile thereof) and any other required
documents must be received by the Information Agent at one of its addresses (or
its facsimile number) set forth herein before 5:00 P.M., New York Time, on the
Expiration Date, unless extended. To ensure receipt of the Acknowledgment and
Agreement and any other required documents, it is suggested that you use
overnight courier delivery or, if the Acknowledgment and Agreement and any other
required documents are to be delivered by United States mail, that you use
certified or registered mail, return receipt requested.
Our records indicate that you own the number of Units set forth in Box
2 entitled "Description of Units Tendered" on the Acknowledgment and
Agreement under the column entitled "Total Number of Units Owned (#)."
If you would like to tender only a portion of your Units, please so
indicate in the space provided in the box.
THE METHOD OF DELIVERY OF THE ACKNOWLEDGMENT AND AGREEMENT AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING LIMITED PARTNER
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
2. SIGNATURE REQUIREMENTS.
INDIVIDUAL AND JOINT OWNERS -- After carefully reading the Letter of Transmittal
and completing the Acknowledgment and Agreement, to tender Units, limited
partners must sign at the "X" in the Signature Box (Box 1) of the Acknowledgment
and Agreement. The signature(s) must correspond exactly with the names printed
(or corrected) on the front of the Acknowledgment and Agreement. NO SIGNATURE
GUARANTEE ON THE ACKNOWLEDGMENT AND AGREEMENT IS REQUIRED IF THE ACKNOWLEDGMENT
AND AGREEMENT IS SIGNED BY THE LIMITED PARTNER (OR BENEFICIAL OWNER IN THE CASE
OF AN IRA). If any tendered Units are registered in the names of two or more
joint owners, all such owners must sign the Acknowledgment and Agreement.
IRAS/ELIGIBLE INSTITUTIONS -- For Units held in an IRA account, the beneficial
owner should sign in the Signature Box and no signature guarantee is required.
Similarly, no signature guarantee is required if Units are tendered for the
account of a bank, broker, dealer, credit union, savings association, or other
entity which is a member in good standing of the Securities Agents Medallion
Program or a bank, broker, dealer, credit union, savings association, or other
entity which is an "eligible guarantor institution" as the term is defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934 (each an "Eligible
Institution").
TRUSTEES, CORPORATIONS, PARTNERSHIP AND FIDUCIARIES -- Trustees, executors,
administrators, guardians, attorneys-in-fact, officers of a corporation,
authorized partners of a partnership or other persons acting in a fiduciary or
representative capacity must sign at the "X" in the Signature Box and have their
signatures guaranteed by an Eligible Institution by completing the signature
guarantee set forth in Box 3 in the Acknowledgment and Agreement. If the
Acknowledgment and Agreement is signed by trustees, administrators, guardians,
attorneys-in-fact, officers of a corporation, authorized partners of a
partnership or others acting in a fiduciary or representative capacity, such
persons should, in addition to having their signatures guaranteed, indicate
their title in the Signature Box and must submit proper evidence satisfactory to
the Purchaser of their authority to so act (see Instruction 3 below).
3. DOCUMENTATION REQUIREMENTS. In addition to the information required to be
completed on the Acknowledgment and Agreement, additional documentation may be
required by the Purchaser under certain circumstances including, but not limited
to, those listed below. Questions on documentation should be directed to the
Information Agent at its telephone number set forth herein.
DECEASED OWNER (JOINT TENANT) -- Copy of death certificate.
DECEASED OWNER (OTHERS) -- Copy of death certificate
(see also Executor/
Administrator/Guardian
below).
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EXECUTOR/ADMINISTRATOR/GUARDIAN -- Copy of court appointment
documents for executor or
administrator; and
(a) a copy of applicable
provisions of the will
(title page, executor(s)'
powers, asset distribution);
or (b) estate distribution
documents.
ATTORNEY-IN-FACT -- Current power of attorney.
CORPORATION/PARTNERSHIP -- Corporate resolution(s) or
other evidence of authority
to act. Partnerships should
furnish a copy of the
partnership agreement.
TRUST/PENSION PLANS -- Unless the trustee(s) are
named in the registration,
a copy of the cover page of
the trust or pension plan,
along with a copy of the
section(s) setting forth
names and powers of
trustee(s) and any
amendments to such sections
or appointment of successor
trustee(s).
4. TAX CERTIFICATIONS. The limited partner(s) tendering Units to the Purchaser
pursuant to the Offer must furnish the Purchaser with the limited partner(s)'
taxpayer identification number ("TIN") and certify as true, under penalties of
perjury, the representations in Box 6 and Box 7 of the Acknowledgment and
Agreement. By signing the Signature Box, the limited partner(s) certifies that
the TIN as printed (or corrected) on Acknowledgment and Agreement in the box
entitled "Description of Units Tendered" and the representations made in Box 6
and Box 7 of the Acknowledgment and Agreement are correct. See attached
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for guidance in determining the proper TIN to give the Purchaser.
U.S. PERSONS. A limited partner that is a U.S. citizen or a resident alien
individual, a domestic corporation, a domestic partnership, a domestic trust or
a domestic estate (collectively, "U.S. Persons"), as those terms are defined in
the Code, should follow the instructions below with respect to certifying Box 6
and Box 7 of the Acknowledgment and Agreement.
BOX 6 - SUBSTITUTE FORM W-9.
Part (i), Taxpayer Identification Number -- Tendering limited partners must
certify to the Purchaser that the TIN as printed (or corrected) on the
Acknowledgment and Agreement in the box entitled "Description of Units Tendered"
is correct. If a correct TIN is not provided, penalties may be imposed by the
Internal Revenue Service (the "IRS"), in addition to the limited partner being
subject to backup withholding.
Part (ii), Backup Withholding -- In order to avoid 31% Federal income tax backup
withholding, the tendering limited partner must certify, under penalty of
perjury, that such limited partner is not subject to backup withholding. Certain
limited partners (including, among others, all corporations and certain exempt
non-profit organizations) are not subject to backup withholding. Backup
withholding is not an additional tax. If withholding results in an overpayment
of taxes, a refund may be obtained from the IRS. When determining the TIN to be
furnished, please refer to the following as a guide:
Individual accounts - should reflect owner's TIN.
Joint accounts - should reflect the TIN of the owner whose name appears first.
Trust accounts - should reflect the TIN assigned to the trust.
IRA custodial accounts - should reflect the TIN of the custodian (not necessary
to provide).
Custodial accounts for the benefit of minors - should reflect the TIN of the
minor.
Corporations, partnership or other business entities - should reflect the TIN
assigned to that entity.
By signing the Signature Box, the limited partner(s) certifies that the TIN as
printed (or corrected) on the front of the Acknowledgment and Agreement is
correct.
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BOX 7 - FIRPTA AFFIDAVIT -- Section 1445 of the Code requires that each limited
partner transferring interests in a partnership with real estate assets meeting
certain criteria certify under penalty of perjury the representations made in
Box 7, or be subject to withholding of tax equal to 10% of the consideration for
interests purchased. Tax withheld under Section 1445 of the Code is not an
additional tax. If withholding results in an overpayment of tax, a refund may be
claimed from the IRS.
FOREIGN PERSONS -- In order for a tendering limited partner who is a Foreign
Person (i.e., not a U.S. Person, as defined above) to qualify as exempt from 31%
backup withholding, such foreign limited partner must submit a statement, signed
under penalties of perjury, attesting to that individual's exempt status. Forms
for such statements can be obtained from the Information Agent.
5. VALIDITY OF ACKNOWLEDGMENT AND AGREEMENT. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance of an
Acknowledgment and Agreement and other required documents will be determined by
the Purchaser and such determination will be final and binding. The Purchaser's
interpretation of the terms and conditions of the Offer (including these
Instructions for the Acknowledgment and Agreement) will be final and binding.
The Purchaser will have the right to waive any irregularities or conditions as
to the manner of tendering. Any irregularities in connection with tenders,
unless waived, must be cured within such time as the Purchaser shall determine.
The Acknowledgment and Agreement will not be valid until any irregularities have
been cured or waived. Neither the Purchaser nor the Information Agent are under
any duty to give notification of defects in an Acknowledgment and Agreement and
will incur no liability for failure to give such notification.
6. ASSIGNEE STATUS. Assignees must provide documentation to the Information
Agent which demonstrates, to the satisfaction of the Purchaser, such person's
status as an assignee.
7. TRANSFER TAXES. The amount of any transfer taxes (whether imposed on the
registered holder or such person) payable on account of the transfer to such
person will be deducted from the consideration unless satisfactory evidence of
the payment of such taxes or exemption therefrom is submitted.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If consideration is to be issued
in the name of a person other than the person signing the Signature Box of the
Acknowledgment and Agreement or if consideration is to be sent to someone other
than such signer or to an address other than that set forth on the
Acknowledgment and Agreement in the box entitled "Description of Units
Tendered," the appropriate boxes on the Acknowledgment and Agreement must be
completed.
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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER - - Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE TAXPAYER IDENTIFICATION
NUMBER OF - -
- -----------------------------------------------------------------------------------------------------------------------------------
1. An individual account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
Funds, the first individual on the account
3. Husband and wife (joint account) The actual owner of the account or, if joint funds,
Either person
4. Custodian account of a minor (Uniform Gift to Minors Act) The minor (2)
5. Adult and minor (joint account) The adult or, if the minor is the only contributor,
the minor (1)
6. Account in the name of guardian or committee for a
designated ward, minor or incompetent person (3) The ward, minor or incompetent person (3)
7. a. The usual revocable savings trust account (grantor The grantor trustee (1)
is also trustee)
b. So-called trust account that is not a legal or valid The actual owner (1)
trust under state law
8. Sole proprietorship account The owner (4)
9. A valid trust, estate or pension trust The legal entity (Do not furnish the identifying number of
the personal representative or trustee unless the legal
entity itself is not designated in the account title.) (5)
10. Corporate account The corporation
11. Religious, charitable, or educational organization account The organization
12. Partnership account held in the name of the business The partnership
13. Association, club, or other tax-exempt organization The organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of Agriculture in the name of The public entity
a public entity (such as a State or local government,
school district, or prison) that receives agricultural
program payments
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's or incompetent person's name and furnish such person's
social security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You may
use your social security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER -- If you do not have a taxpayer identification number
or you do not know your number, obtain Form SS-5, Application for a Social
Security Number Card (for individuals), or Form SS-4, Application for Employer
Identification Number (for businesses and all other entities), at the local
office of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
- An international organization or any agency or instrumentality
thereof.
- A registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the
Code.
- An exempt charitable remainder trust, or a non-exempt trust described
in section 4947 (a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
- A futures commission merchant registered with the Commodity Futures
Trading Commission.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section
1441 of the Code.
- Payments to Partnerships not engaged in a trade or business in the
U.S. and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid
in money.
- Payments made by certain foreign organizations.
- Payments made to an appropriate nominee.
- Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals. NOTE: You
may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
- Payments of tax exempt interest (including exempt interest dividends
under section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
- Payments made to an appropriate nominee.
Exempt payees described above should file a substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage
dividends, that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under sections 6041,
6041A(A), 6045, and 6050A of the Code.
PRIVACY ACT NOTICE - - Section 6109 of the Code requires most recipients of
dividend, interest, or other payments to give correct taxpayer identification
numbers to payers who must report the payments to the IRS. The IRS uses the
numbers for identification purposes. Payers must be given the numbers whether or
not recipients are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER - - If
you fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING - - If
you make a false statement with no reasonable basis that results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION - - Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
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The Acknowledgment and Agreement and any other documents required by
the Letter of Transmittal should be sent or delivered by each limited partner or
such limited partner's broker, dealer, bank, trust company or other nominee to
the Information Agent at one of its addresses set forth below.
THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<Table>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
For information, please call:
TOLL FREE: (888) 349-2005
</Table>
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