EXHIBIT 1(a)
Offer to Purchase For Cash
AIMCO
AIMCO Properties, L.P.
is offering to purchase limited partnership units in
VMS NATIONAL RESIDENTIAL PORTFOLIO I
(A PARTICIPANT IN VMS NATIONAL PROPERTIES JOINT VENTURE)
FOR $1,082 PER UNIT IN CASH
Upon the terms and subject to the conditions set forth herein, we will accept
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and not properly withdrawn prior to the expiration date and the purchase of all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 fewer than 320 unitholders, we will
purchase only 99% of the total number of units so tendered by each limited
partner. See "The Offer--Section 7. Effects of the Offer."
Our offer and your withdrawal rights will expire at midnight, New York City
time, on November 14, 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 by the amount of 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 $1,082 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 to this offer to purchase 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 BE DIRECTED TO
THE INFORMATION AGENT AT (888) 349-2005.
October 18, 2001
(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 VMS National Properties Joint
Venture.
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 and most amendments to the partnership
agreement.
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.
For information, please call:
TOLL FREE: (888) 349-2005
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TABLE OF CONTENTS
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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 our 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
Your general partner is not making a recommendation with respect to this offer.................................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 units to us in this offer, you will no longer be entitled to 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 our acceptance of, and payment for, your units....................................................5
Your partnership has a significant balloon payment due on its mortgage debt in 2008............................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..............................................................................12
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....................................................................23
Section 13. Certain Information Concerning Your Partnership..................................................24
Section 14. Voting Power.....................................................................................30
Section 15. Source Of Funds..................................................................................30
Section 16. Dissenters' Rights...............................................................................31
Section 17. Conditions of The Offer..........................................................................31
Section 18. Certain Legal Matters............................................................................33
Section 19. Fees And Expenses................................................................................33
ANNEX I OFFICERS AND DIRECTORS.............................................................................35
ANNEX II LETTER OF TRANSMITTAL..............................................................................40
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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. References to the "general partner" of the partnership refer to its
managing general partner, MAERIL, Inc. The partnership is one of two joint
venture participants in VMS National Properties Joint Venture ("VMS"), which
owns 15 multifamily properties. References to property and property income of
the partnership refer to such properties and their income if and as the context
requires.
o THE OFFER. Subject to the terms hereof, we are offering to acquire the
limited partnership units of VMS NATIONAL RESIDENTIAL PORTFOLIO I (a
participant in VMS), your partnership, for $1,082 per unit in cash. See
"The Offer--Section 1. Terms of the Offer; Expiration Date; Proration",
"The Offer--Section 9. Background and Reasons for the
Offer--Determination of Offer Price" and "The Offer--Section 7. Effects
of the Offer."
o FACTORS IN DETERMINING THE OFFER PRICE. In determining the offer price
per unit we principally considered:
o The per unit liquidation value of your partnership, based on
the partnership's annualized operating results for the first
six months of 2001, as capitalized using the direct
capitalization method.
o The absence of a trading market for the units. See "The
Offer--Section 9. Background and Reasons for the
Offer--Comparison of Offer Price to Alternative
Consideration."
o PRORATIONS. If the purchase of all validly tendered units would result
in there being fewer 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", and
"The Offer--Section 7. Effects of the Offer."
o EXPIRATION DATE. Our offer expires on November 14, 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 to
this offer to purchase as Annex II, to the Information Agent, River
Oaks Partnership Services, Inc., at one of the addresses set forth on
the back of this offer to purchase. See "The Offer--Section 3.
Procedures for Tendering Units."
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 December 16, 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."
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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
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 asset
management fees 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 OUR
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.
YOUR GENERAL PARTNER IS NOT MAKING A RECOMMENDATION WITH RESPECT TO THIS OFFER.
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
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
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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 UNITS TO US IN THIS OFFER, YOU WILL NO LONGER BE ENTITLED TO
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 and our affiliates own 41.25, or 6.7%, of the
outstanding limited partner units of your partnership. If we acquire more than
an additional 43.3% of the outstanding units, we and our affiliates will own a
majority of the outstanding limited partner units and will have the ability to
control such votes 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
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.
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YOU MAY BE UNABLE TO TRANSFER YOUR UNITS FOR A 12-MONTH PERIOD.
Under United States federal tax laws, your partnership will terminate
for tax purposes if there is a sale or exchange of 50% or more of the total
interest in capital and profits of your partnership within any 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 OUR 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.
YOUR PARTNERSHIP HAS A SIGNIFICANT BALLOON PAYMENT DUE ON ITS MORTGAGE DEBT IN
2008.
The properties have approximately $91,352,000 of balloon payments due
on their senior mortgage debt in 2008. The principal amount of junior debt on
the properties is $44,489,000, and it also matures in 2008. Capital expenditures
have been identified at each of the properties that are funded out of operating
cash flow from the properties that otherwise would be used to service the junior
mortgages encumbering the properties (the "Junior Debt"), and longer term
capital expenditures have been identified at each of the properties that are
funded through an increase in required capital expenditure reserve funding. It
is anticipated that such funding will significantly increase the period of time
that it takes to amortize the Junior Debt, may cause the Junior Debt to
negatively amortize for some period of time, and may result in, or increase the
amount of, balloon payments due on the Junior Debt at the end of the term. If
the properties cannot be refinanced or sold at or before the end of such term
for a sufficient amount, the partnership will risk losing such properties
through foreclosure.
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) 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 midnight, New York City time, on November 14, 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 on
or after the commencement of our offer and prior to the date on which we acquire
your units pursuant to our offer. If the offer price is reduced in this manner
we will notify you and, if necessary, we will extend the offer period so that
you will have at least ten business days from the date of our notice to withdraw
your units.
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 fewer than 320 unitholders, 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."
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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, units validly tendered, (iii)
extend the offer and, subject to 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 October 1,
2001.
This offer is being mailed on or about October 18, 2001 to the persons
shown by your partnership's records to be limited partners or, in the case of
units owned of record by Individual Retirement Accounts and qualified plans,
beneficial owners of units.
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, 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 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 circumstances 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 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. But if more units than can be purchased under the partnership agreement
are so tendered and not withdrawn, we will 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 so tendered with appropriate
adjustments to avoid purchases of fractional units.
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.
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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 December
16, 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 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 units 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.
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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 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."
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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 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 December 16,
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, subsequent offering
periods may be provided in tender offers for "any and all" outstanding units of
a partnership. 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. Because of the remote possibility
that we may purchase fewer than all units tendered, as described in "The
Offer--Section 2. Acceptance for Payment and Payment for Units", a subsequent
offering period is not available to us.
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.
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.
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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.
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
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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.
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 and our affiliates own 41.25, or 6.7%, of the outstanding limited
partner units of your partnership. If we are successful in acquiring more than
43.3% of the outstanding units pursuant to this offer, we and our affiliates
will own more than 50% of the total outstanding limited partner units. This
interest, combined with our control of your partnership's general partner, would
allow us to control the outcome of most 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
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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 or our
offer for VMS National Residential Portfolio II, the result will be a reduction
in the number of unitholders in VMS. 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 VMS, 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--together with the units of VMS National Residential
Portfolio II, the other participant in VMS--are registered under Section 12(g)
of the Exchange Act, which means, among other things, that VMS is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. We
are simultaneously offering to purchase units of VMS National Residential
Portfolio II. We do not expect or intend that consummation of the offers 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, VMS could apply to
de-register the units under the Exchange Act. Your partnership currently has 737
limited partners. If units are tendered which would result in fewer than 320
unitholders in your partnership and VMS National Residential Portfolio II, we
will purchase no more than 99% of the units tendered by each limited partner to
assure that there are more than 300 unitholders 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 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.
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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 and Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661. 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 Properties, L.P., please refer to
our Annual Report on Form 10-K405/A for the year ended December 31, 2000, filed
May 1, 2001, our Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2001, filed August 14, 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-
<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------- --------------------------
2000 1999 1998 2001 2000
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
OPERATING DATA:
RENTAL PROPERTY OPERATIONS
Rental and other property revenue ................ $ 1,051,000 $ 531,883 $ 373,963 $ 646,004 $ 482,384
Property operating expenses ...................... (426,177) (213,064) (145,966) (251,895) (195,404)
Owned property management expenses ............... (13,663) (1,543) (1,878) (6,218) (6,241)
Depreciation ..................................... (323,321) (131,257) (83,908) -- --
----------- ----------- ----------- ----------- -----------
Income from property operations .................. 287,839 186,019 142,211 387,891 280,739
----------- ----------- ----------- ----------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income from affiliates . 49,692 37,799 19,396 97,998 22,435
Management and other expenses .................... (27,199) (14,897) (16,764) (62,490) (9,378)
General administrative expenses allocation ....... (10,310) (2,136) (196) (4,176) (3,527)
Amortization of intangibles ...................... (6,698) (14,297) (8,735) (9,233) (3,069)
----------- ----------- ----------- ----------- -----------
Income (loss) from service company business ...... 5,485 6,469 (6,299) (22,099) (6,461)
----------- ----------- ----------- ----------- -----------
General and administrative expenses, net ......... (7,813) (12,016) (10,336) (4,373) (5,150)
----------- ----------- ----------- ----------- -----------
Depreciation on rental property .................. -- -- -- (200,604) (146,580)
Interest expense ................................. (269,826) (139,124) (88,208) (169,332) (122,604)
Interest and other income ........................ 66,241 54,782 28,170 32,038 28,511
Equity in earnings (losses) of unconsolidated
real estate partnerships (a) ................... 7,618 (2,588) (2,665) (9,207) 3,886
Equity in earnings (losses) of unconsolidated
subsidiaries (b) ............................... (2,290) (4,595) 6,284 -- 4,472
Loss from IPLP exchange and assumption ........... -- (684) (2,648) -- --
Minority interest ................................ (3,872) (5,788) (1,868) (10,881) (13,452)
----------- ----------- ----------- ----------- -----------
Income from operations ........................... 83,382 82,475 64,641 47,631 36,283
Gain (loss) on disposition of properties ......... 26,335 (1,785) 4,287 1,556 5,331
----------- ----------- ----------- ----------- -----------
Net income ....................................... $ 109,717 $ 80,690 $ 68,928 $ 49,187 $ 41,614
=========== =========== =========== =========== ===========
BALANCE SHEET INFORMATION (end of period):
Real estate, before accumulated depreciation ..... $ 7,012,452 $ 4,512,697 $ 2,771,169 $ 7,798,878 $ 5,527,566
Real estate, net of accumulated depreciation ..... 6,099,694 4,096,705 2,543,014 6,469,173 4,954,303
Total assets ..................................... 7,699,174 5,684,251 4,186,764 8,080,980 6,336,867
Secured notes payable ............................ 3,258,342 1,954,259 819,331 3,586,179 2,653,746
Partnership-obligated mandatory
redeemable convertible preferred
securities of a subsidiary trust ............... 32,330 149,500 149,500 25,347 149,500
Partners' Capital ................................ 2,831,964 2,486,889 2,153,335 3,018,642 2,460,265
OTHER INFORMATION:
Total owned or controlled properties (end of
period) ........................................ 566 373 234 575 483
Total owned or controlled apartment units (end
of period) ..................................... 153,872 106,148 61,672 156,572 135,261
Total equity apartment units
(end of period) ................................ 111,748 133,113 171,657 99,594 100,441
Units under management (end of period) ........... 60,669 124,201 146,034 56,243 108,176
Basic earnings (loss) per Common OP Unit ......... $ 0.53 $ 0.39 $ 0.80 $ (0.05) $ 0.13
Diluted earnings (loss) per Common OP Unit ....... $ 0.52 $ 0.38 $ 0.78 $ (0.05) $ 0.13
Distributions paid per Common OP Unit ............ $ 2.80 $ 2.50 $ 2.25 $ 1.56 $ 1.40
Cash flows provided by operating activities ...... $ 400,364 $ 254,380 $ 144,152 $ 241,023 $ 150,911
</Table>
-15-
<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------- --------------------------
2000 1999 1998 2001 2000
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Cash flows provided by (used in) investing
activities ....................................... $ (546,481) $ (243,078) $ (342,541) $ 64,563 $ (197,352)
Cash flows provided by (used in) financing
activities ..................................... $ 201,628 $ 37,470 $ 214,133 $ (327,308) $ 35,546
Funds from operations (c) ........................ $ 439,830 $ 320,434 $ 193,830 $ 262,640 $ 203,425
Weighted average number of OP Units outstanding .. 69,063 63,446 47,624 84,051 81,948
</Table>
----------
(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-
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 owns,
in the aggregate, approximately 6.7% of your partnership's outstanding limited
partnership units, along with a 2% general partner interest held by the general
partner.
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 many 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. In considering its options, the general partner
noted that the senior mortgages cannot be prepaid in accordance with their terms
until January 1, 2007. 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). The term of
the partnership will continue until December 31, 2030, unless the partnership is
terminated sooner under the provisions of the partnership agreement.
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-
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 unitholders.
If the transaction were approved, all of the unitholders, 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 unitholders, 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 each portfolio in the event of a liquidation of VMS, and then
determining the proceeds that would be paid to each limited partner of each
portfolio. 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 the VMS National
Properties Joint Venture Agreement, 70.61% of the estimated liquidation proceeds
of VMS are assumed to be distributed to limited partners of your partnership.
Our offer price represents the per unit liquidation proceeds determined in this
manner.
-18-
<Table>
Gross valuation of partnership properties $ 183,279,000
Plus: Cash and cash equivalents 970,709
Plus: Other partnership assets, net of security deposits 4,174,782
Less: Mortgage debt, including accrued interest (178,331,045)
Less: Accounts payable and accrued expenses (1,558,990)
Less: Other liabilities (17,276)
-------------
Partnership valuation before taxes and certain costs 8,517,180
Less: Disposition fees 0
Less: Extraordinary capital expenditures and deferred maintenance (6,297,977)
Less: Closing costs (1,282,953)
-------------
Estimated net valuation of your partnership (Cash shortfall) 936,250
Percentage of estimated net valuation allocated to holders of units 70.61%
-------------
Estimated net valuation of units 661,124
Total number of units 611.25
-------------
Estimated valuation per unit 1,082
=============
Cash consideration per unit 1,082
=============
</Table>
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 December 31, 2030, unless sooner terminated
as provided in the agreement or by law.
<Table>
<Caption>
COMPARISON TABLE PER UNIT
---------------- --------
Cash offer price .................................. $ 1,082.00
Alternatives
Prior cash tender offer price ................ $ 289.00(1)
Highest price on secondary market ............ $ N/A
Estimated liquidation proceeds ............... $ 1,082
</Table>
----------
(1) Highest price offered in our 1999 and 2000 tender offers.
PRIOR TENDER OFFERS. On May 15, 2000 we commenced a tender offer at the
price of $289 per unit. In that case, we determined the offer price using the
same basic method with respect to the partnership's residential
-19-
property as we used for the current offer, except that we applied a
capitalization rate to 1999 property income for that property. We acquired 18.5
units in that offer.
In June 1999, we commenced a tender offer at the original offer of
$41.00 per unit and acquired 22.75 units. We determined the offer price using
the same basic method for the current offer but used property income for an
earlier period.
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 us 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 VMS and your partnership are
sold at their book value, and that the net proceeds of sale are allocated to the
unitholders in accordance with the VMS National Properties Joint Venture
Agreement and your partnership's agreement of limited partnership.
-20-
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 unitholders the
amount of the estimated net valuation of your partnership based on the VMS
National Properties Joint Venture Agreement and on your partnership's agreement
of limited partnership as if VMS and your partnership were being liquidated at
the present 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
-21-
Offer" and "The Offer--Section 11. Conflicts 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 is our subsidiary. 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 $598,000 in 1998, $558,000 in 1999,
and $656,000 in 2000. Total fees and reimbursements for the first six months of
2001 were $271,000 ($542,000 annualized). The property manager is entitled to
receive a percentage of gross receipts from the partnership's residential
property for providing property management services. It received management fees
of $1,122,000 in 1998, $1,160,000 in 1999, and $1,238,000 in 2000. Property
management fees for the first six months of 2001 were $665,000 ($1,330,000
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's property is located.
We believe 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.
TRANSACTIONS WITH AFFILIATES. We purchased (i) the Junior Debt on
November 19, 1999, (ii) a significant interest in the residual value of the
properties on November 16, 1999, (iii) economic and voting rights in a 0.61%
interest in Partners Liquidating Trust, which effectively owns a significant
interest in the residual value of the properties, in September 2000, (iv) a 1.1%
interest in PLT in March 2001, and (v) a 72.34% interest in the VMS bankruptcy
claim owned by the Trust in March 2001. In connection with our purchase of the
Junior Debt, (i) the seller, which owned the senior loans on the properties
until October 1998, acknowledged its prior consent to $1,749,286 of capital
expenditures made on the properties in addition to those funded pursuant to the
capital expenditure reserves for the senior and junior loans, which capital
expenditures were funded out of cash flow that would otherwise have been used to
pay debt service on the Junior Debt, and (ii) certain deadlines as to the
timeliness and completion of certain scheduled deferred maintenance items were
waived. In addition, we, VMS, and the servicer of the senior loans encumbering
the properties (the "Servicer") agreed to a methodology to reach agreement as to
whether or not additional capital expenditures, in addition to permitted capital
expenditures of $300 per unit per year, are needed at each property and the
methodology for funding any such capital expenditures. Capital expenditures
identified pursuant to these procedures are funded out of operating cash flow
from the properties that otherwise would be used to service the Junior Debt on
the properties; longer term capital expenditures so identified are funded
through an increase in required capital expenditure reserve funding. On November
19, 1999, an agreement was executed relating to the required capital
expenditures at Towers of Westchester Park. On July 10, 2000, similar agreements
were executed relating to North Park Apartments, Scotchollow, Pathfinder, Buena
Vista Apartments, Mountain View Apartments, Casa de Monterey and The Bluffs. In
August 2000, similar agreements were executed relating to Shadowood Apartments,
Crosswood Park Apartments, Vista Village Apartments, Watergate Apartments,
Chapelle Le Grande Apartments, and Forest Ridge Apartments and on September 19,
2000, a similar agreement was executed
-22-
relating to Terrace Gardens Apartments. These agreements and their economic
impact on VMS are more fully discussed in VMS's most recent Annual Report on
Form 10-K for the period ended December 31, 2000 and Quarterly Report on Form
10-Q for the quarter ended June 30, 2001, which may be obtained as set forth in
"The Offer--Section 13. Certain Information Concerning Your Partnership."
It is anticipated that such funding will significantly increase the
period of time that it takes to amortize the Junior Debt, may cause the Junior
Debt to negatively amortize for some period of time, and may result in or
increase the amount of balloon payments due on the Junior Debt at the end of the
term. If the properties cannot be refinanced or sold at or before the end of
such term for a sufficient amount, VMS will risk losing such properties through
foreclosure. There can be no assurance of the effect that such additional
capital expenditures, and the funding therefor, will have on the operations of
the properties, or whether the properties will be maintained in the future in an
acceptable or marketable state of repair.
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. 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 and our affiliates 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
-23-
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. VMS was organized in September 1984 under the laws of the
state of Illinois. Its primary business is real estate ownership and related
operations. VMS was formed for the purpose of making investments in various
types of real properties which offer potential capital appreciation and cash
distributions to its limited partners.
VMS's investment portfolio currently consists of the following 15
residential apartment complexes: Buena Vista, a 92-unit complex in Pasadena,
California; Casa de Monterey, a 144-unit complex in Norwalk, California;
Crosswood Park, a 180-unit complex in Citrus Heights, California; Mountain View,
a 168-unit complex in San Dimas, California; Pathfinders Village, a 246-unit
complex in Fremont, California; Scotchollow, a 418-unit complex in San Mateo,
California; The Bluffs, a 137-unit complex in Milwaukee, Oregon; Vista Village,
a 220-unit complex in El Paso, Texas; Chapelle Le Grande, a 105-unit complex in
Merrillville, Indiana; Shadowood, a 120-unit complex in Monroe, Louisiana;
Towers of Westchester Park, a 303-unit complex in College Park, Maryland;
Terrace Gardens, a 126-unit complex in Omaha, Nebraska; North Park Apartments, a
284-unit complex in Evansville, Indiana; Watergate, a 140-unit complex in Little
Rock, Arkansas; and Forest Ridge, a 278-unit complex in Flagstaff, Arizona.
The general partners of VMS are VMS National Residential Portfolio I
(your partnership) and VMS National Residential Portfolio II. Your partnership
owns a 70.61% participation interest in VMS. A wholly owned subsidiary of AIMCO
serves as manager of the properties owned by your partnership. There are
currently 611.25 units of your partnership issued and outstanding, which are
held of record by 737 limited partners.
Your partnership's and general partner'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
VMS annual report prepared by your partnership which was sent to you earlier
this year, particularly Item 2 of Form 10-K, which contains detailed information
regarding the properties owned, including mortgages, rental rates and taxes. In
addition, VMS is subject to the information and reporting requirements of the
Exchange Act and information about VMS can be obtained in the same manner as
information can be obtained about us, as set forth in "The Offer--Section 8.
Information Concerning Us and Certain of Our Affiliates."
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS.
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 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 $6,297,977 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.
-24-
TERM OF YOUR PARTNERSHIP. Under the VMS National Properties Joint
Venture Agreement, the term of VMS will continue until September 26, 2044.
However, under your partnership's agreement of limited partnership, the term of
the partnership will expire December 31, 2030 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. VMS was restricted to annual capital improvements
of $300 per unit for all of the properties, which was the limit set by the
Senior and junior mortgage agreements for funding of capital improvements. VMS,
the holder of the Junior Debt and the Servicer have agreed to a procedure to
assess whether or not capital expenditures, in addition to those permitted under
the $300 per unit limit, are needed at the properties and the methodology for
funding any such capital expenditures. This procedure was completed for each of
the properties. The parties agreed upon approximately $6,297,977 in required
capital expenditures for 2001 and that these costs would be funded out of the
cash flows from the properties that otherwise would be utilized to pay debt
service on the Junior Debt. As a result, the balloon payment due on the Junior
Debt may be higher at maturity in January 2008 as accrued but unpaid interest is
rolled into the principal balance. See "Section 11. Conflicts Of Interest And
Transactions With Affiliates - Transactions With Affiliates."
COMPETITION. There are other residential properties within the market
areas of your partnership's properties. The number and quality of competitive
properties in such areas 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 VMS 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-K of VMS for the year ended December 31, 2000, and the
Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
VMS NATIONAL PROPERTIES JOINT VENTURE
(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 ................................ $ 16,684 $ 15,137 $ 31,015 $ 28,658 $ 27,956
Net Income (Loss) ............................. (1,074) (485) (40) (6,402) (6,958)
Net Income (Loss) per Limited Partnership
Unit (Portfolio I) .......................... (1,155) (522) (43) (6,842) (7,483)
Distributions per Limited Partnership Unit .... 0 0 0 0 0
BALANCE SHEET DATA:
Cash and Cash Equivalents ..................... 1,780 922 2,153 2,004 931
Investment Property, Net of Accumulated
Depreciation ................................ 60,407 59,865 60,375 61,686 65,829
Total Assets .................................. 67,041 66,367 68,879 68,445 71,937
Mortgage Note Payable ......................... 135,158 136,759 137,732 137,811 139,732
Partners' Capital (Deficit) ................... (159,118) (158,489) (158,044) (158,009) (151,607)
Total Distributions ........................... 0 0 0 0 0
CASH FLOWS:
Net Increase (Decrease) in Cash and Cash
Equivalents ................................. (373) (1,082) 149 1,073 (1,579)
Net Cash Provided by Operating Activities ..... 4,816 2,952 8,647 6,260 5,545
</Table>
-25-
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
-------- -------- --------- ---
Buena Vista Apartments 10/26/84 Fee ownership subject to 92-unit apartments
Pasadena, California first and second mortgage
Casa de Monterey 10/26/84 Fee ownership subject to 144-unit apartments
Norwalk, California first and second mortgage
Crosswood Park 12/05/84 Fee ownership subject to 180-unit apartments
Citrus Heights, California first and second mortgage
Mountain View Apartments 10/26/84 Fee ownership subject to 168-unit apartments
San Dimas, California first and second mortgage
Pathfinders Village 10/26/84 Fee ownership subject to 246-unit apartments
Fremont, California first and second mortgage
Scotchollow 10/26/84 Fee ownership subject to 418-unit apartments
San Mateo, California first and second mortgage
The Bluffs 10/26/84 Fee ownership subject to 137-unit apartments
Milwaukee, Oregon first and second mortgage
Vista Village Apartments 10/26/84 Fee ownership subject to 220-unit apartments
El Paso, Texas first and second mortgage
Chapelle Le Grande 12/5/84 Fee ownership subject to 105-unit apartments
Merrillville, Indiana first and second mortgage
North Park Apartments 11/14/84 Fee ownership subject to 284-unit apartments
Evansville, Indiana first and second mortgage
Shadowood Apartments 11/14/84 Fee ownership subject to 120-unit apartments
Monroe, Louisiana first and second mortgage
Towers of Westchester Park 10/26/84 Fee ownership subject to 303-unit apartments
College Park, Maryland first and second mortgage
Terrace Gardens 10/26/84 Fee ownership subject to 126-unit apartments
Omaha, Nebraska first and second mortgage
Watergate Apartments 10/26/84 Fee ownership subject to 140-unit apartments
Little Rock, Arkansas first and second mortgage
Forest Ridge Apartments 10/26/84 Fee ownership subject to 278-unit apartments
Flagstaff, Arizona first and second mortgage
</Table>
-26-
ACCUMULATED DEPRECIATION SCHEDULE. The following shows the gross
carrying value and accumulated depreciation of your partnership's property as of
December 31, 2000.
<Table>
<Caption>
Gross
Carrying Accumulated
Property Value Depreciation Method Rate
-------- --------- ------------ ------ ----
(In Thousands)
North Park $ 10,594 $ 6,949 SL/200% DBL 5-27.5 yrs
Chapelle Le Grande 5,036 3,188 SL/200% DBL 5-27.5 yrs
Terrace Gardens SL/150% and 5-27.5 yrs
6,279 3,816 200% DBL
Forest Ridge SL/150% and 5-27.5 yrs
9,302 5,684 200% DBL
Scotchollow 28,844 17,480 SL/150% DBL 5-27.5 yrs
Pathfinders Village 16,902 9,200 SL/200% DBL 5-27.5 yrs
Buena Vista 6,060 3,633 SL/200% DBL 5-27.5 yrs
Mountain View 11,042 6,098 SL/200% DBL 5-29 yrs
Crosswood Park 9,317 5,629 SL/150/% DBL 5-29 yrs
Casa de Monterey 8,376 5,032 SL/200% DBL 5-27.5 yrs
The Bluffs 4,487 2,961 SL/200% DBL 5-27.5 yrs
Watergate 7,274 4,673 SL/200% DBL 5-27.5 yrs
Shadowood 4,441 2,919 SL 5-27.5 yrs
Vista Village 6,948 4,190 SL 5-27.5 yrs
Towers of Westchester Park 18,200 11,275 SL 5-27.5 yrs
--------- ---------
Totals $ 153,102 $ 92,727
========= =========
</Table>
SCHEDULE OF MORTGAGES. The following shows certain information
regarding the outstanding first and second mortgage encumbering your
partnership's property as of December 31, 2000.
<Table>
<Caption>
Monthly
Principal Balance Payment Stated Principal
at Including Interest Period Maturity Balance Due
Property December 31, 2000 Interest Rate Amortized Date At Maturity
-------- ----------------- --------- -------- ---------- -------- --------------
(In Thousands) (In Thousands)
North Park Apartments
1st mortgage $ 6,135 $ 51 8.50% 25 years 01/01/08 $ 5,376
2nd mortgage 1,860 (1) 10.84% 25 years 01/01/08 (1)
Chapelle Le Grande
1st mortgage $ 3,148 26 8.50% 25 years 01/01/08 $ 2,759
2nd mortgage 995 (1) 10.84% 25 years 01/01/08 (1)
Terrace Gardens
1st mortgage 4,357 36 8.50% 25 years 01/01/08 $ 3,818
2nd mortgage 1,259 (1) 10.84% 25 years 01/01/08 (1)
Forest Ridge Apartments
1st mortgage 5,789 48 8.50% 25 years 01/01/08 $ 5,073
2nd mortgage 1,706 (1) 10.84% 25 years 01/01/08 (1)
</Table>
-27-
<Table>
<Caption>
Monthly
Principal Balance Payment Stated Principal
at Including Interest Period Maturity Balance Due
Property December 31, 2000 Interest Rate Amortized Date At Maturity
-------- ----------------- --------- -------- ---------- --------- --------------
(In Thousands) (In Thousands)
Scotchollow
1st mortgage 28,590 236 8.50% 25 years 01/01/08 $ 25,054
2nd mortgage 8,415 (1) 10.84% 25 years 01/01/08 (1)
Pathfinders Village
1st mortgage 13,210 109 8.50% 25 years 01/01/08 $ 11,576
2nd mortgage 4,075 (1) 10.84% 25 years 01/01/08 (1)
Buena Vista Apartments
1st mortgage 4,861 40 8.50% 25 years 01/01/08 $ 4,260
2nd mortgage 1,360 (1) 10.84% 25 years 01/01/08 (1)
Mountain View Apartments
1st mortgage 7,023 58 8.50% 25 years 01/01/08 $ 6,154
2nd mortgage 1,894 (1) 10.84% 25 years 01/01/08 (1)
Crosswood Park
1st mortgage 5,463 45 8.50% 25 years 01/01/08 $ 4,788
2nd mortgage 1,343 (1) 10.84% 25 years 01/01/08 (1)
Casa de Monterey
1st mortgage 4,024 33 8.50% 25 years 01/01/08 $ 3,479
2nd mortgage 1,232 (1) 10.84% 25 years 01/01/08 (1)
The Bluffs
1st mortgage 3,654 30 8.50% 25 years 01/01/08 $ 3,202
2nd mortgage 1,097 (1) 10.84% 25 years 01/01/08 (1)
Watergate Apartments
1st mortgage 2,844 23 8.50% 25 years 01/01/08 $ 2,492
2nd mortgage 827 (1) 10.84% 25 years 01/01/08 (1)
Shadowood Apartments
1st mortgage 2,209 18 8.50% 25 years 01/01/08 $ 1,936
2nd mortgage 608 (1) 10.84% 25 years 01/01/08 (1)
Vista Village Apartments
1st mortgage 3,259 27 8.50% 25 years 01/01/08 $ 2,856
2nd mortgage 988 (1) 10.84% 25 years 01/01/08 (1)
Towers of Westchester Park
1st mortgage
2nd mortgage 11,890 98 8.50% 25 years 01/01/08 $ 10,420
3,617 (1) 10.84% 25 years 01/01/08 (1)
---------- ------- ----------
Totals $ 137,732 $ 878 $ 93,243
========== ======= ==========
</Table>
-28-
----------
(1) Junior Debt payments are based on excess monthly cash flow at each property,
with any unpaid balance due at maturity. Under the junior loan agreements,
excess monthly cash flow is defined as revenue generated from operation of a
property less (1) operating expenses of the property, (2) the debt service
payment for the senior loans, (3) the tax and insurance reserve deposit and (4)
replacement reserve deposit. Pursuant to agreements signed for each of VMS's
investment properties with, among others, the Servicer, it is anticipated that
the funding of capital expenditures for the properties, as discussed in "The
Offer--Section 11. Conflicts Of Interest And Transactions With Affiliates," will
significantly increase the period of time that it takes to amortize the Junior
Debt, may cause the Junior Debt to negatively amortize for some period of time,
and may result in or increase the amount of balloon payments due on the Junior
Debt at the end of the term of such debt. See "The Offer--Section 11. Conflicts
Of Interests And Transactions With Affiliates."
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
-------------------- -------------------
(per unit)
Property 2001* 2000 2001* 2000
-------- ------- ------- ----- ----
North Park $ 6,564 $ 6,484 89% 93%
Chapelle Le Grande $ 8,820 8,376 93% 93%
Terrace Gardens $ 9,852 9,649 94% 94%
Forest Ridge $ 7,776 7,499 98% 97%
Scotchollow $18,672 16,333 97% 99%
Pathfinders Village $18,024 15,692 97% 98%
Buena Vista $15,792 14,715 94% 97%
Mountain View $13,224 12,294 97% 98%
Crosswood Park $10,824 10,034 96% 96%
Casa de Monterey $ 9,864 9,129 95% 98%
The Bluffs $ 7,368 7,253 92% 93%
Watergate $ 7,560 7,472 94% 92%
Shadowood $ 6,948 6,729 96% 94%
Vista Village $ 6,756 6,587 88% 90%
Towers of Westchester Park $12,528 12,161 98% 97%
</Table>
----------
* Actual rates and percentages through June 30, 2001 have been annualized.
The rates and percentages 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 0.00
1999 0.00
2000 0.00
2001 (through June 30) 0.00
-------
Total $ 0.00
=======
</Table>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP. We and our
affiliates, AIMCO and AIMCO-GP, Inc., collectively have voting and dispositive
power with respect to 41.25, or 6.7%, of the outstanding units of
-29-
your partnership, along with a 2% general partner interest held by the general
partner. Except as set forth in this offer to purchase, 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 a percentage 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 $598,000 $1,122,000
1999 $558,000 $1,160,000
2000 $656,000 $1,238,000
2001* $542,000 $1,330,000
</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.
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., 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
and VMS are the responsibility of the general partner. Because the general
partner of your partnership and VMS National Residential Portfolio II is our
subsidiary, we control the management of your partnership and VMS. 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 $616,740 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
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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:
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 VMS or your partnership
or local markets in which VMS 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%
measured from the close on the last trading day preceding the
date of this offer and the close on the last trading day
preceding to the expiration of this offer, (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
measured between the close on the last trading day preceding
the date of this offer and the close on the last trading day
preceding the expiration of this offer, (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
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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 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
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o we shall not have adequate cash or financing commitments
available to pay 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 at any time prior to the expiration of this offer 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.
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 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.
You will not pay any partnership transfer fees if you tender your
units. 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
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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.
THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<Table>
<Caption>
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>
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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, Legal and Regulatory Affairs
Miles Cortez................................... 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>
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<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, Legal and
Regulatory Affairs effective August 2001. Mr. Bonder served
as Executive Vice President, General Counsel and Secretary
of AIMCO from December 1997 to August 2001. Prior to joining
AIMCO, Mr. Bonder served as Senior Vive 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.
Miles Cortez........................ Mr. Cortez was appointed Executive Vice President, General
Counsel and Secretary in August 2001. Since December 1997,
Mr. Cortez has been a founding partner and the senior
partner of the law firm of Cortez Macaulay Bernhardt &
Schuetze LLC. From August 1993 to November 1997, Mr. Cortez
was a partner in the law firm of McKenna & Cuneo, LLP. Mr.
Cortez was the President of the Denver Bar Association from
1982-1983; was Chairman of the Ethics Committee of the
Colorado Bar Association from 1977-1978, was President of
the Colorado Bar Association from 1996-1997, and was a
member of the American Bar Association House of Delegates
from 1990-1995. Mr. Cortez is a Life Fellow of the Colorado
Bar Foundation and American Bar Foundation. Mr. Cortez has
been listed in the national publication "The Best Lawyers in
America" for business litigation for the past ten years.
</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.
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.
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.
Cambridge Associates, Inc. In 1973, Mr. Bailey co-founded Cambridge Associates, Inc.,
1 Winthrop Square, which is an investment consulting firm for non-profit
Suite 500 institutions and wealthy family groups. He is also
Boston, MA 02110 Co-Founder, Treasurer and Director of The Plymouth Rock
Company, Direct Response Corporation 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
12 Auldwood Lane and is currently Chairman of the Audit Committee and a
Rumson, NJ 07660 member of the Compensation Committee. Mr. 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
199 Broadway and became Chairman of the Compensation Committee on March
Suite 4300 19, 1998. Mr. Martin is a member of the Audit Committee. Mr.
Denver, CO 80202 Martin has served as President and Chief Executive Officer
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
215 Lexington Avenue and is a member of the Audit and Compensation Committees.
4th Floor Mr. Rhodes has served as the President and a Director of
New York, NY 10016 National Review magazine since November 1992, where he has
also 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>
-39-
ANNEX II
LETTER OF TRANSMITTAL
TO TENDER UNITS OF LIMITED PARTNERSHIP INTEREST IN
VMS NATIONAL RESIDENTIAL PORTFOLIO I (THE "PARTNERSHIP")
PURSUANT TO AN OFFER TO PURCHASE
DATED OCTOBER 18, 2001 (THE "OFFER DATE")
BY
AIMCO PROPERTIES, L.P.
--------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT MIDNIGHT, NEW YORK TIME,
ON NOVEMBER 14, 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.
-40-
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
-41-
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 DECEMBER 16, 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.
-42-
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 midnight, 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).
-43-
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.
-44-
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.
-45-
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>
--------------------------------------------------------------------------------------------------------------------------
GIVE THE
TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: 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 The minor (2)
Minors Act)
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 The ward, minor or incompetent person (3)
designated ward, minor or incompetent person (3)
7. a. The usual revocable savings trust account The grantor trustee (1)
(grantor is also trustee)
b. So-called trust account that is not a legal or The actual owner (1)
valid 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 The organization
organization account
12. Partnership account held in the name of the The partnership
business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of Agriculture in The public entity
the name of 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.
-46-
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.
-47-
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.
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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
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