Offer to Purchase For Cash
AIMCO
AIMCO Properties, L.P.
is offering to purchase limited partnership units in
SHELTER PROPERTIES III
FOR $79.00 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If units are validly tendered and not properly withdrawn prior to the expiration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 June 6, 2002, 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 4 OF THIS OFFER TO PURCHASE FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER, INCLUDING THE FOLLOWING:
- - We determined the offer price of $79.00 per unit without any arms-length
negotiations. Accordingly, our offer price may not reflect the fair market
value of your units.
- - As described in more detail herein, certain legal actions have been filed
alleging, among other things, breaches of fiduciary duty by your
partnership's general partner and certain of its affiliates. Although we
cannot predict the outcome of these actions, including the nature, if any,
of any final relief or settlement, a limited partner who tenders his units
in the offer may not be able to participate in or benefit from any such
later relief or settlement. Limited partners will be expected to assign
any claims they have to the Purchaser as a condition of tendering their
units. There can be no assurance that a limited partner would not realize
greater value for his units by holding on to his units at this time and
waiting for any such relief or settlement in the future. We advise you to
consult legal counsel if you have any questions. See "The Offer - Section
13. Certain Information Concerning Your Partnership."
- - Your partnership's 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.
- - 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.
(Continued on next page)
_______________________________________
If you decide to accept our offer, you should complete and sign the
enclosed acknowledgment and agreement as instructed in the letter of
transmittal, which is 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.
May 8, 2002
(Continued from prior page)
- - 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.
- - It is possible that we may conduct a future offer at a higher price.
- - For any units that we acquire from you, you will not receive any future
distributions from operating cash flow of your partnership or upon a sale
or refinancing of property owned by your partnership.
- - The general partner makes no recommendation as to whether you should
tender your units.
- - We and our affiliates own a majority of the outstanding units of your
partnership. As a result, we and our affiliates control most voting
decisions with respect to your partnership, including but not limited to
the removal of the general partner, most amendments to the partnership
agreement, and the sale of all or substantially all of your partnership's
assets.
THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
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.
By facsimile: For information please call:
(201) 896-0910 TOLL FREE (888) 349-2005
Or
(201) 896-1900
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TABLE OF CONTENTS
Page
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SUMMARY TERM SHEET............................................................................................... 1
RISK FACTORS..................................................................................................... 4
If you tender all of your units, you may not be able to participate in any final litigation
relief or settlement........................................................................................ 4
We did not obtain a third-party valuation or appraisal and did not determine our offer price through
arms-length negotiation..................................................................................... 4
Our offer price may not represent fair market value........................................................... 4
Our offer price does not reflect future prospects............................................................. 4
Our offer price may not represent liquidation value........................................................... 4
Continuation of the Partnership; No time frame regarding sale of property..................................... 4
Holding your units may result in greater future value......................................................... 5
Your general partner faces conflicts of interest with respect to the offer.................................... 5
Your general partner is not making a recommendation with respect to this offer................................ 5
Your general partner faces conflicts of interest relating to management fees.................................. 5
We may make a future offer at a higher price.................................................................. 5
You will recognize taxable gain on a sale of your units....................................................... 5
If you tender units to us in this offer, you will no longer be entitled to distributions from your
partnership................................................................................................. 6
We control your partnership................................................................................... 6
You could recognize gain in the event of a reduction in your partnership's liabilities........................ 6
We may delay our acceptance of, and payment for, your units................................................... 6
Your partnership has balloon payments on its mortgage debt.................................................... 6
THE OFFER........................................................................................................ 7
Section 1. Terms of the Offer; Expiration Date; Proration.................................................... 7
Section 2. Acceptance for Payment and Payment for Units...................................................... 8
Section 3. Procedure for Tendering Units..................................................................... 9
Section 4. Withdrawal Rights................................................................................. 11
Section 5. Extension of Tender Period; Termination; Amendment; No Subsequent Offering Period................. 11
Section 6. Certain Federal Income Tax Matters................................................................ 12
Section 7. Effects of the Offer.............................................................................. 14
Section 8. Information Concerning Us and Certain of our Affiliates........................................... 15
Section 9. Background and Reasons for the Offer.............................................................. 18
Section 10. Position of the General Partner of your Partnership with respect to the Offer.................. 23
Section 11. Conflicts of Interest and Transactions with Affiliates......................................... 24
Section 12. Future Plans of the Purchaser.................................................................. 24
Section 13. Certain Information concerning your Partnership................................................ 25
Section 14. Voting Power................................................................................... 34
Section 15. Source of Funds................................................................................ 34
Section 16. Dissenters' Rights............................................................................. 35
Section 17. Conditions of the Offer........................................................................ 35
Section 18. Certain Legal Matters.......................................................................... 37
Section 19. Fees and Expenses.............................................................................. 37
ANNEX I - OFFICERS AND DIRECTORS................................................................................. 1
ANNEX II - LETTER OF TRANSMITTAL................................................................................. 1
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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.
- - THE OFFER. Subject to the terms hereof, we are offering to acquire limited
partnership units of Shelter Properties III, your partnership, for $79.00
per unit in cash. See "The Offer -- Section 1. Terms of the Offer;
Expiration Date; Proration", "The Offer -- Section 7. Effects of the
Offer" and "The Offer -- Section 9. Background and Reasons for the Offer
-- Determination of Offer Price."
- - FACTORS IN DETERMINING THE OFFER PRICE. In determining the offer price per
unit we principally considered:
- The per unit liquidation value of your partnership, which we
calculated to be $79.00, based on the pro forma operating results of
your partnership for the quarter ended March 31, 2002, as
capitalized using the direct capitalization method and using a
capitalization rate of 11.30% with respect to Colony House
Apartments, 11.22% with respect to Essex Park Apartments, 9.37% with
respect to North River Village Apartments, and 10.78% with respect
to Willowick Apartments.
- Prices at which units have recently sold to the extent such
information is available to us.
- 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."
- - PRORATIONS. If more units than can be purchased under the partnership
agreement are tendered and not withdrawn, we will accept for payment and
pay for those units so tendered, which do not violate the terms of your
partnership agreement, pro rata according to the number of units so
tendered, with appropriate adjustments to avoid purchases of fractional
units. See "The Offer -- Section 2. Acceptance for Payment and Payment for
Units." In addition, 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."
- - EXPIRATION DATE. Our offer expires on June 6, 2002, unless extended, and
you can tender your units until our offer expires. See "The Offer --
Section 1. Terms of the Offer; Expiration Date; Proration."
- - 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."
- - 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 which is 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. Procedure for Tendering
Units."
- - 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 July 8, 2002, if we have not
already accepted units for purchase and payment. See "The Offer -- Section
4. Withdrawal Rights."
- - 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."
- - 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."
- - AVAILABILITY OF FUNDS. We currently have the necessary cash and a line of
credit to consummate the offer. See "The Offer -- Section 15. Source of
Funds."
- - CONDITIONS OF THE OFFER. There are a number of conditions of 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 of the Offer."
- - 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."
- - 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."
- - 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 Interest and Transactions with
Affiliates" and "The Offer -- Section 13. Certain Information concerning
your Partnership."
- - CERTAIN LEGAL ACTIONS AFFECTING YOUR PARTNERSHIP. As described in more
detail herein, certain legal actions have been filed alleging, among other
things, breaches of fiduciary duty by your partnership's general partner
and certain of its affiliates. Although we cannot predict the outcome of
these actions, including the nature, if any, of any final relief or
settlement, a limited partner who tenders his units in the offer may not
be able to participate in or benefit from any such later relief or
settlement. Limited partners will be expected to assign any claims they
have to the Purchaser as a condition of tendering their units. There can
be no assurance that a limited partner would not realize greater value for
his units by holding on to his units at this time and waiting for any such
relief or settlement in the future. We advise you to consult legal counsel
if you have any questions. See "The Offer - Section 13. Certain
Information Concerning Your Partnership."
- - 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 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."
- - 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 Period; Termination; Amendment; No Subsequent Offering Period."
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- - 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:
IF YOU TENDER ALL OF YOUR UNITS, YOU MAY NOT BE ABLE TO PARTICIPATE IN ANY FINAL
LITIGATION RELIEF OR SETTLEMENT.
Certain legal actions have been filed alleging, among other things,
breaches of fiduciary duty by your partnership's general partner and certain of
its affiliates. Although we cannot predict the precise outcome of these actions
or the precise nature of any final relief or settlement with respect to these
actions, a limited partner who tenders his units in the offer may not
participate in or benefit from such relief or any settlement. There can be no
assurance that a limited partner would not realize greater value for his units
by not tendering his units in our offer, and participating in any such relief or
settlement
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 pro forma property
income for the quarter ended March 31, 2002. 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.
CONTINUATION OF THE PARTNERSHIP; NO TIME FRAME REGARDING SALE OF PROPERTY.
Your general partner, which is our subsidiary, is proposing to
continue to operate your partnership and not to attempt to liquidate it at the
present time. Your partnership's prospectus, dated October 28, 1981, pursuant to
which units in your partnership were sold, indicated that your partnership was
intended to be self-liquidating and that it was anticipated that the
partnership's properties would be sold within 3 years of their acquisition,
provided market conditions permit. The prospectus also indicated that there
could be no assurance that the partnership would be able to so liquidate and
that, unless sooner terminated as provided in the partnership agreement, the
existence of the partnership would continue until the year 2021. It is not known
when the property owned by your partnership may be sold. The market for units in
the partnership is illiquid, and it may be difficult to sell your investment in
the partnership in the future. The general partner of your partnership
continually considers whether a property should be sold or otherwise disposed of
after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. At the
current time, the general partner of your partnership believes that a sale of
the property
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would not be advantageous given market conditions, the condition of the property
and tax considerations. In particular, the general partner considered the
changes in the local rental market, the potential for appreciation in the value
of a property and the tax consequences to you on a sale of property. We cannot
predict when your partnership's property will be sold or otherwise disposed of.
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. 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
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.
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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.
WE 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 34,841, or 62.71%, of
the outstanding units of your partnership. Because we and our affiliates own a
majority of the outstanding units, we have the ability to control most 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.
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 BALLOON PAYMENTS ON ITS MORTGAGE DEBT.
Your partnership has a balloon payment of $1,543,000 due on its
mortgage debt in October 2003. Your partnership will have to refinance such
debt, sell assets or otherwise obtain additional funds prior to the balloon
payment due date, or it will be in default and could lose the property to
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 June 6, 2002,
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.
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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 more units than can be purchased under your partnership agreement
are tendered and not withdrawn, we will accept for payment and pay for those
units so tendered, which do not violate the terms of your partnership agreement,
pro rata according to the number of units so tendered, with appropriate
adjustments to avoid purchases of fractional units. See "The Offer - Section 2.
Acceptance for Payment and Payment for Units."
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."
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 of the Offer," which sets forth in full the
conditions of the offer. We reserve the right (but in no event shall we be
obligated), in our reasonable discretion, to waive any or all of those
conditions. If, on or prior to the expiration date, any or all of the conditions
have not been satisfied or waived, we reserve the right to (i) decline to
purchase any of the units tendered, terminate the offer and return all tendered
units to tendering limited partners, (ii) waive all the unsatisfied conditions
and purchase, subject to the terms of the offer, any and all units validly
tendered, (iii) extend the offer and, subject to 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 April 1, 2002.
This offer is being mailed on or about May 8, 2002 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 or applicable law. 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
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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 your 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.
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 July 8,
2002, 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.
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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.
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
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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 30% with respect to
payment of the offer price, you may have to provide us with your correct
taxpayer identification number. See the instructions to the acknowledgment and
agreement set forth in the letter of transmittal attached as Annex II and "The
Offer -- Section 6. Certain Federal Income Tax Matters."
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount realized on the disposition (the amount
realized is generally the offer price plus the partnership liabilities 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 July 8, 2002,
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.
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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. Procedure 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 (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 of 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 of 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.
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
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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.
TAX CONSEQUENCES TO LIMITED PARTNERS TENDERING UNITS FOR CASH. You
will recognize gain or loss on a sale of a unit of limited partnership interest
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
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amount realized with respect to a unit of limited partnership interest 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
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 30% 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
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profits of a partnership within any 12-month period, such partnership terminates
for United States federal income tax purposes. See "The Offer -- Section 2.
Acceptance for Payment and Payment for Units."
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 34,841 or 62.71% of the outstanding limited
partnership units of your partnership. Because we and our affiliates own a
majority of the outstanding units and control your partnership's general
partner, we 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 most voting decisions
with respect to your partnership. In general, we will vote the units owned by us
in whatever manner we deem to be in our best interests, which may not be in the
interest of other limited partners. This could (1) prevent non-tendering limited
partners from taking action that they desire but that we oppose and (2) enable
us to take action desired by us but opposed by non-tendering limited partners.
We are also affiliated with the company that currently manages, and has managed
for some time, the property owned by your partnership. If 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 in accordance
with the terms of our offer 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 unitholders tender their units pursuant to our
offer, the result will be a reduction in the number of unitholders in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be
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expected to result in a reduction in the liquidity and volume of activity in the
trading market for the security. In the case of your partnership, however, there
is no established public trading market for the units and, therefore, we do not
believe a reduction in the number of limited partners will materially further
restrict your ability to find purchasers for your units through secondary market
transactions.
The units are registered under Section 12(g) of the Exchange Act,
which means, among other things, that your partnership is required to file
periodic reports with the SEC and to comply with the SEC's proxy rules. We do
not expect or intend that consummation of the offer will cause the units to
cease to be registered under Section 12(g) of the Exchange Act. If the units
were to be held by fewer than 300 persons, your partnership could apply to
de-register the units under the Exchange Act. Your partnership currently has
1,242 unitholders. If units are tendered which would result in fewer than 320
unitholders in your partnership, 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 our offer. See "The Offer -- Section 1. Terms of the Offer;
Expiration Date; Proration."
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 ("AIMCO Properties"). 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, through its subsidiaries, operates approximately 1,400
properties, including approximately 280,000 apartment units, and serves
approximately one million residents. AIMCO's properties are located in 45
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 one of
the largest owners and managers of multi-family apartment properties in the
United States. AIMCO's Class A Common Stock is listed and traded on the New York
Stock Exchange under the symbol "AIV."
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 (the "SEC")
relating to our business, financial condition and other matters, including the
complete financial statements summarized below. Such reports and other
information may be inspected at the public reference facilities maintained by
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661, and the
Woolworth Building, 233 Broadway, New York, New York 10279. 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 normally be inspected at the offices of the New York Stock Exchange
at 20 Broad Street, New York, New York 10005, although those offices are
currently closed.
For more information regarding AIMCO Properties, please refer to our
Annual Report on Form 10-K405 for the year ended December 31, 2001, filed April
1, 2002 (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.
-15-
Except as described in "The Offer -- Section 9. Background and
Reasons for the Offer", and "The Offer -- Section 11. Conflicts of Interest 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.
Certain financial information relating to AIMCO Properties is hereby
incorporated by reference to the audited financial statements for AIMCO
Properties' 2001 and 2000 fiscal years set forth in Part II, Item 6 of AIMCO
Properties' Annual Report on Form 10-K405 for the fiscal year ended December 31,
2001 filed with the SEC on April 1, 2002 (the "2001 10-K"). This report may be
inspected at, and copies may be obtained from, the same places and in the manner
set forth below.
Set forth below is certain selected consolidated financial
information relating to AIMCO Properties and its subsidiaries which has been
derived from the financial statements contained in the 2001 10-K. More
comprehensive financial information is included in the 2001 10-K and other
documents filed by AIMCO Properties with the SEC. The financial information that
follows is qualified in its entirety by reference to these reports and other
documents, including the financial statements and related notes contained
therein, which may be obtained as provided below.
-16-
AIMCO PROPERTIES L.P.
(in thousands, except per unit data)
FOR THE YEAR ENDED DECEMBER 31,
Operating Data: 2001 2000 (1) 1999 (1) 1998 (1) 1997 (1)
-------------------------------------------------------------------
Rental and other property revenues $1,286,603 $1,051,000 $ 531,883 $ 373,963 $ 193,006
Property operating and owned management expenses (505,560) (439,840) (214,607) (147,844) (77,521)
-------------------------------------------------------------------
Income from rental property operations 781,043 611,160 317,276 226,119 115,485
Income (loss) from investment management business 27,591 15,795 8,605 (6,103) (1,876)
General and administrative expenses (18,530) (18,123) (14,152) (10,532) (5,396)
Depreciation of rental property (2) (341,781) (298,946) (131,257) (83,908) (37,741)
Interest expense (310,361) (269,826) (139,124) (88,208) (51,385)
Interest and other income, net 68,593 66,241 54,098 28,170 8,676
Operating earnings 149,917 107,757 82,475 64,641 30,246
Distribution to minority interest partners in excess of income (47,701) (24,375) -- -- --
Gain (loss) on disposition of real estate property 18,848 26,335 (1,785) 4,287 2,720
Net income 121,064 109,717 80,690 68,928 32,697
Net income attributed to preferred stockholders 100,134 70,217 54,173 26,533 2,315
Net income attributed to common stockholders 20,930 39,500 26,517 42,395 30,382
Other Information:
Total owned or controlled properties (end of period) 557 566 373 234 147
Total owned or controlled apartment units (end of period) 156,142 153,872 106,148 61,672 40,039
Total equity properties (end of period) 574 683 751 902 515
Total equity apartment units (end of period) 92,626 111,748 133,113 171,657 83,431
Units under management (end of period) 31,520 60,669 124,201 146,034 69,587
Basic earnings per unit $ 0.25 $ 0.53 $ 0.39 $ 0.80 $ 1.09
Dividends paid per unit $ 0.25 $ 0.52 $ 0.38 $ 0.78 $ 1.08
Distributions paid per common OP unit $ 3.12 $ 2.80 $ 2.50 $ 2.25 $ 1.85
BALANCE SHEET INFORMATION:
Real estate, before accumulated depreciation $8,313,228 $7,012,452 $4,512,697 $2,771,169 $1,657,207
Real estate, net of accumulated depreciation 6,703,600 6,099,694 4,096,705 2,543,014 1,503,922
Total assets 8,222,390 7,699,174 5,684,251 4,186,764 2,100,510
Total indebtedness 4,669,662 4,360,115 2,584,289 1,601,730 808,530
Mandatorily redeemable convertible preferred securities 20,637 32,330 149,500 149,500 --
Partners' capital 3,085,846 2,831,964 2,486,889 2,153,335 960,176
(1) Certain reclassifications have been made to 2000, 1999, and 1998
amounts to conform with the 2001 presentation. These reclassifications
represent certain eliminations of self-charged management fee income and
expenses in accordance with consolidation accounting principles. Effective
January 1, 2001, AIMCO Properties began consolidating its previously
unconsolidated subsidiaries (see Note 6 to the consolidated financial
statements in the 2001 10-K). Prior to this date, AIMCO Properties had
significant influence but did not have control. Accordingly, such
investments were accounted for under the equity method.
(2) Effective July 1, 2001 for certain assets and October 1, 2001 for the
majority of the portfolio AIMCO Properties extended the estimated useful
lives of its buildings and improvements from a weighted average composite
life of 25 years to a weighted average composite life of 30 years. This
change increased net income by approximately $36 million or $0.42 per
diluted unit in 2001.
-17-
For the years ended December 31, 2001, 2000, and 1999, AIMCO Properties' FFO is
calculated as follows (amounts in thousands):
2001 2000 1999
-------------------------------
Net income 121,064 109,717 80,690
Real estate depreciation, net of minority interests 329,635 277,734 121,767
Real estate depreciation related to unconsolidated entities 57,506 59,360 104,071
Distribution to minority interest partners in excess of income 47,701 24,375 --
Amortization of intangibles 18,729 12,068 36,731
Income tax arising from disposition of real estate property 3,202
Gain on disposition of real estate property (18,848) (26,335) 1,785
Gain on disposition of land 3,843 -- --
Deferred income tax benefit -- 154 1,763
Interest expenses on mandatorily redeemable convertible preferred securities 1,568 8,869 6,892
Preferred unit distributions (35,747) (26,112) (33,265)
-------------------------------
Funds from operations 528,653 439,830 320,434
===============================
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
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 62.71% of your partnership's outstanding limited
partnership units, along with a 1% 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. The following is a brief discussion of the
advantages and disadvantages of the alternatives considered by your general
partner.
-18-
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, 2021, 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 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 limited partnership interests in AIMCO Properties.
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:
- The per unit liquidation value of your partnership, which we
calculated to be $79.00, based on the pro forma operating
results of your partnership for the quarter ended March 31,
2002, as capitalized using the direct capitalization method
and using a capitalization rate of 11.30% with respect to
Colony House Apartments, 11.22% with respect to Essex Park
Apartments, 9.37% with respect to North River Village
Apartments, and 10.78% with respect to Willowick Apartments.
- Prices at which the units have recently sold to the extent
such information is available to us; and
- The absence of a liquid trading market for the units.
-19-
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 pro forma operating results for the
quarter ended March 31, 2002; (ii) adjusting this value for liabilities,
non-real estate assets, and certain other costs; and (iii) determining the
proceeds that would be paid to limited partners in the event of a liquidation of
your partnership. A capitalization rate is a percentage (rate of return),
applied to property income by purchasers of residential real estate, to
determine the present value of income property. The lower the capitalization
rate, the higher the value produced, and the higher the capitalization rate, the
lower the value produced. We used property incomes based on the pro forma
operating results of your partnership for the quarter ended March 31, 2002. But
in determining the appropriate capitalization rate, we also considered the
following factors. Our method for selecting a capitalization rate begins with
each property being assigned a location and condition rating (for example, "A"
for excellent, "B" for good, and so on). We then adjusted the capitalization
rate based on whether the property's mortgage debt is above or below market
rates. We also consider recent changes in your partnership's property income and
occupancy rate. All these factors are subjective in nature, and others
evaluating the same property might use a different capitalization rate and
derive a different property value.
Although the direct capitalization method is an accepted way of
valuing real estate, there are a number of other methods available to value real
estate, each of which may result in different valuations of a property. We
determined our cash consideration in the following manner. First, we estimated
the gross property value of your partnership's property by applying a
capitalization rate of 11.30% with respect to Colony House Apartments, 11.22%
with respect to Essex Park Apartments, 9.37% with respect to North River Village
Apartments, and 10.78% with respect to Willowick Apartments to pro forma
operating results for the quarter ended March 31, 2002, to obtain estimated
gross property value. We then calculated the value of the equity of your
partnership by adding to the aggregate gross property value the value of the
non-real estate assets of your partnership and deducting its liabilities and
certain other costs, including required capital expenditures, deferred
maintenance and closing costs, to derive its net equity value. Finally, using
this net equity value, we determined the proceeds that would be paid to limited
partners in the event of a liquidation of your partnership. Based on the terms
of your partnership's agreement of limited partnership, 100% of the estimated
liquidation proceeds are assumed to be distributed to limited partners of your
partnership. Our offer price represents the per unit liquidation proceeds
determined in this manner.
Gross valuation of partnership properties $ 20,250,000
Plus: Cash and cash equivalents 176,055
Plus: Other partnership assets, net of security deposits 491,934
Less: Mortgage debt, including accrued interest (14,980,555)
Less: Loans from Partners
Less: Accounts payable and accrued expenses (62,150)
Less: Other liabilities (274,355)
Less: Distributions to GP's and SLP's (236)
------------
Partnership valuation before taxes and certain costs $ 5,600,693
Less: Estimated State Taxes and Nonresident Withholdings (214,297)
Less: Disposition fees 0
Less: Extraordinary capital expenditures and deferred maintenance (414,000)
Less: Closing costs (607,500)
------------
Estimated net valuation of your partnership $ 4,364,896
Percentage of estimated net valuation allocated to holders of units 100%
------------
Estimated net valuation of units $ 4,364,896
Total number of units 55,000.00
------------
Estimated valuation per unit $ 79
============
Cash consideration per unit $ 79
============
-20-
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 since December 31, 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, 2021, unless sooner
terminated as provided in the agreement or by law.
COMPARISON TABLE PER UNIT
---------------- --------
Cash offer price ............................................. $ 79.00
Alternatives
Prior cash tender offer price............................ $ 264.00(1)
Highest price on secondary market........................ $ 231.28(2)
Estimated liquidation proceeds........................... $ 79.00
- -----------------
(1) Highest price offered in our 1999 through 2001 tender offers.
(2) Since January 1, 2000.
PRIOR TENDER OFFERS. An unaffiliated third party made a tender offer
for your partnership's units at a price of $85.00 per unit, which offer expired
on March 9, 2001.
In August 2000, we commenced a tender offer to purchase units of
your partnership at a price of $264.00 per unit, which price was determined
using the same basic methodology as we are using in this current tender offer,
except that we also considered a fairness opinion from an unaffiliated third
party. We acquired 2,204 units, representing approximately 3.97% of the
outstanding units of your partnership, pursuant to that offer.
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
-21-
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
periods listed below 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
High Low
---- ---
Period Ended February 28, 2002: ..................... N/A N/A
Year Ended December 31, 2001: ....................... N/A N/A
Year Ended December 31, 2000: ....................... $215.00 $215.00
Set forth in the table below are the high and low sales prices of
units for the periods listed below, 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
High Low
---- ---
Period Ended April 29, 2002: ........................ N/A N/A
Year Ended December 31, 2001: ....................... N/A N/A
Year Ended December 31, 2000: ....................... $231.28 $231.28
We purchased 325 units at a price of $264.00 per unit on March 29,
2002 in a private sale.
ESTIMATED LIQUIDATION PROCEEDS. Liquidation value is a measure of
the price at which the assets of your partnership would sell if disposed of by
your partnership in an arms-length transaction to a willing buyer that has
access to relevant information regarding the historical revenues and expenses of
the business. Your general partner, which is our subsidiary, estimated the
liquidation value of the units using the same direct capitalization method and
assumptions as we did in valuing the units for the offer price. The liquidation
analysis assumes that your partnership's property is sold to an independent
third party at the current property value, that other balance sheet assets
(excluding amortizing assets) and liabilities of your partnership are sold at
their book value, and that the net proceeds of sale are allocated to the
unitholders in accordance with your partnership's agreement of limited
partnership.
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.
-22-
ALLOCATION OF CONSIDERATION. We have allocated to the unitholders the
amount of the estimated net valuation of your partnership based on your
partnership's agreement of limited partnership as if your partnership were being
liquidated at the 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 is remaining neutral and makes no
recommendation as to whether you should tender or refrain from tendering your
units in the offer. 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.
Without quantifying or otherwise attaching any particular weight to any of
the following factors or information, you may want to consider the following:
- the offer gives you an opportunity to make an individual decision on
whether to tender your units or to continue to hold them;
- the offer price and the method used to determine the offer price;
- 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;
- prices at which the units have recently sold, to the extent such
information is available;
- the absence of an established trading market for your units;
- an analysis of possible alternative transactions, including a
property sale, or a liquidation of the partnership; and
- an evaluation of the financial condition and results of operations
of your partnership.
Except for this offer, neither the general partner of your partnership or
its affiliates have any plans or arrangements to tender any units. Except as
otherwise provided in "The Offer - - Section 12. Future Plans of the Purchaser,"
the general partner does not have any present plans or proposals which relate to
or would result in an extraordinary transaction, such as a merger,
reorganization or liquidation, involving your partnership; a purchase or sale or
transfer of a material amount of your partnership's assets; or any changes in
your partnership's present capitalization, indebtedness or distribution
policies. For information relating to certain relationships between your
partnership and its general partner, on one hand, and AIMCO and its affiliates,
on the other and conflicts of interests with respect to the tender offer, see
"The Offer - - Section 9. Background and Reasons for the Offer" and "The Offer -
- - Section 11. Conflicts of Interest and Transactions with Affiliates." See also
"The Offer - - Section 9. Background and Reasons for the Offer - - Comparison to
Alternative Consideration - - Prior Tender Offers" for certain information
regarding transactions in units of your partnership.
11. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. The general partner of
your partnership became a majority-owned subsidiary of AIMCO on October 1, 1998,
when AIMCO merged with Insignia Financial Group, Inc. Your general partner
became a wholly owned subsidiary of AIMCO on February 26, 1999, when Insignia
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Properties Trust merged with AIMCO. Accordingly, the general partner of your
partnership has substantial conflicts of interest with respect to the offer. As
a consequence of our ownership of units, we may have incentives to seek to
maximize the value of our ownership of units, which in turn may result in a
conflict for your general partner in attempting to reconcile our interests with
the interests of the other limited partners. We desire to purchase units at a
low price and you desire to sell units at a high price. 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. The
general partner makes no recommendation as to whether you should tender or
refrain from tendering 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 $524,000 in 2000 and $652,000 in 2001.
The property manager is entitled to receive 5 percent of gross receipts from the
partnership's residential property for providing property management services.
It received management fees of $291,000 in 2000, and $302,000 in 2001. 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 the general market areas where your partnership's property is
located. We believe that this concentration of properties in a general market
areas 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. During 1986, a liability of approximately
$185,000 was incurred to the general partners for sales commissions earned.
Pursuant to the partnership agreement, this liability cannot be paid until
certain levels of returns are received by the limited partners. As of December
31, 2001, the level of return to the limited partners has not been met.
Beginning in 2001, the partnership began insuring its properties up to
certain limits through coverage provided by AIMCO Properties which is generally
self-insured for a portion of losses and liabilities related to workers
compensation, property casualty and vehicle liability. The partnership insures
its properties above the AIMCO Properties limits through insurance policies
obtained by AIMCO Properties from insurers unaffiliated with the corporate
general partner. During the year ended December 31, 2001, the partnership paid
AIMCO Properties and its affiliates approximately $59,000 for insurance coverage
and fees associated with policy claims administration.
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 or other consideration. We
also may
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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 by the partnership agreement. Limited
partners may vote on a liquidation, and significantly influence or control the
outcome of any such vote. Our primary objective in seeking to acquire the units
pursuant to the offer is not, however, to influence the vote on any particular
transaction, but rather to generate a profit on the investment represented by
those units.
13. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP.
GENERAL. Shelter Properties III was organized on May 15, 1981 under the
laws of the State of South Carolina. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
acquiring and operating for investment income-producing commercial and
multifamily residential properties.
Your partnership's investment portfolio currently consists of the
following residential apartment complexes: Essex Park Apartments, a 323-units
residential apartment complex located in Columbia, South Carolina; Colony House
Apartment's, a 194-unit residential apartment complex located in Murfreesboro,
Tennessee; North River Village Apartment, a 133-unit residential apartment
complex located in Atlanta, Georgia; and Willowick Apartments, a 180-unit
residential apartment complex located in Greenville, South Carolina.
The managing general partner of your partnership is Shelter Realty III
Corporation, which is a wholly owned subsidiary of AIMCO (the "general
partner"). We are also a general partner of your partnership. A wholly owned
subsidiary of AIMCO also serves as manager of the residential property owned by
your partnership. There are currently 55,000 units outstanding, which are held
of record by 1,242 limited partners. Your partnership's and the 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
annual report prepared by your partnership which was sent to you earlier this
year, particularly Item 2 of Form 10-KSB which contains detailed
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information regarding the properties owned, including mortgages, rental rates
and taxes. In addition, your partnership is subject to the information and
reporting requirements of the Exchange Act and information about your
partnership 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 spent approximately $731,000 for
capital expenditures at the residential property in 2001, and expects to spend
approximately $414,000 for capital improvements at the residential property in
2002, to repair and update the property. Although there can be no assurance as
to future performance, however, these expenditures are expected to improve the
desirability of the property to tenants. The general partner does not believe
that a sale of the property at the present time would adequately reflect the
property's future prospects. Another significant factor considered by your
general partner is the likely tax consequences of a sale of the property for
cash. Such a transaction would likely result in tax liabilities for many limited
partners.
TERM OF YOUR PARTNERSHIP. Under your partnership's agreement of limited
partnership, the term of the partnership will continue until December 31, 2021,
unless sooner terminated as provided in the agreement or by law. Limited
partners could, as an alternative to tendering their units, take a variety of
possible actions, including voting to liquidate the partnership or amending the
agreement of limited partnership to authorize limited partners to cause the
partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
CAPITAL REPLACEMENTS. Your partnership has an ongoing program of capital
improvements, replacements and renovations, including floor covering, water
heater, appliance and roof replacements, electrical improvements, and other
replacements and renovations in the ordinary course of business. All capital
improvements and renovation costs, which totaled $731,000 for 2001 and which are
budgeted at $414,000 for 2002, are expected to be paid from operating cash
flows, cash reserves, or from short-term or long-term borrowings.
COMPETITION. There are other residential properties within the market
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 one
of the largest owners and managers of multifamily apartment properties in the
United States.
FINANCIAL DATA. The selected financial information of your partnership set
forth below for the years ended December 31, 2001 and 2000 is based on audited
financial statements. This information should be read in conjunction with such
financial statements, including notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Your Partnership"
in the Annual Report on Form 10-KSB of your partnership for the year ended
December 31, 2001.
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SHELTER PROPERTIES III
For the Year Ended
December 31,
(in thousands, except per unit data)
Operating Data: 2001 2000
Total Revenues $5,759 $5,711
Net income (Loss) 177 274
Net Income per limited partnership unit 3.18 4.93
Distributions per limited partnership unit 26.05 134.62
Balance Sheet Data:
Cash and Cash Equivalents $237 $665
Real Estate, Net of Accumulated Depreciation 10,720 11,074
Total Assets 11,769 13,355
Notes Payable 14,954 15,291
General Partners' Capital (Deficit) (106) (94)
Limited Partners' Capital (Deficit) (3,942) (2,684)
Partners' Capital (Deficit) (4,048) (2,778)
Total Distributions (1,447) (7,412)
Net increase (decrease) in cash and cash equivalents (428) 10
Net cash provided by operating activities 1,541 1,806
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.
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
- -------- -------- ----------------- ---
Essex Park Apartments 10/29/81 Fee ownership subject to a Apartment
Columbia, South Carolina first mortgage 323 units
Colony House Apartments 10/31/81 Fee ownership subject to a Apartment
Murfreesboro, Tennessee first mortgage 194 units
North River Village Apartments 4/21/82 Fee ownership subject to a Apartment
Atlanta, Georgia first and second mortgage (1) 133 units
Willowick Apartments 6/30/82 Fee ownership subject to Apartment
Greenville, South Carolina first mortgage 180 units
(1) Property is held by a limited partnership in which your partnership
owns a 99.99% interest.
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ACCUMULATED DEPRECIATION SCHEDULE. The following shows the gross carrying
value and accumulated depreciation of your partnership's property as of December
31, 2001.
GROSS
CARRYING ACCUMULATED FEDERAL
VALUE DEPRECIATION TAX BASIS
PROPERTY (in thousands) (in thousands) RATE METHOD (in thousands)
Essex Park Apartments $10,662 $6,808 5-36 S/L $1,604
Colony House Apartments 6,728 4,087 5-36 S/L 1,154
North River Village 6,300 4,038 5-32 S/L 1,129
Apartments
Willowick Apartments 5,259 3,296 5-32 S/L 850
------- ------- -------
Totals $28,949 $18,229 $4,737
SCHEDULE OF MORTGAGES. The following shows certain information regarding
the outstanding first mortgage encumbering your partnership's property as of
December 31, 2001.
PRINCIPAL PRINCIPAL
BALANCE AT BALANCE
DECEMBER 31, STATED DUE AT
2001 INTEREST PERIOD MATURITY MATURITY
PROPERTY (in thousands) RATE AMORTIZED DATE (in thousands)
Essex Park Apartments
1st mortgage $6,862 7.22% (1) 01/01/21 $--
Colony House Apartments
1st mortgage 3,465 7.22% (1) 01/01/21 --
North River Village
Apartments
1st mortgage 1,546 7.83% (2) 10/15/03 1,489
2nd mortgage 54 7.83% None 10/15/03 54
Willowick Apartments
1st mortgage 3,038 7.22% (1) 01/01/21 --
----------
14,965 $1,543
Less unamortized
present value discounts -11
----------
Totals $14,954
(1) The principal balance is being amortized over 240 months with the loan
scheduled to be fully amortized on January 1, 2021.
(2) The principal balance is being amortized over 344 months with a balloon
payment due October 15, 2003.
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On December 15, 2000, the partnership refinanced the mortgage notes payable for
Colony House Apartments, Essex Park Apartments, and Willowick Apartments.
The refinancing of Colony House Apartments replaced first and second mortgage
indebtedness of approximately $2,088,000 and $81,000, respectively, with a new
mortgage of $3,540,000. The mortgage was refinanced at a rate of 7.22% compared
to the prior rate of 7.60%. Payments of approximately $28,000 are due on the
first day of each month until the loan matures on January 1, 2021 at which time
the loan will be fully amortized. Capitalized loan costs incurred on the
refinancing were approximately $87,000 as of December 31, 2000. During 2001,
additional loan costs of approximately $23,000 were incurred. Under the terms of
the previous loan agreement, the partnership incurred prepayment penalties of
approximately $78,000. Along with the prepayment penalties, the partnership
wrote off unamortized loan costs of approximately $22,000 and mortgage
amortization discounts of approximately $44,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $144,000.
The refinancing of Essex Park Apartments replaced first and second mortgage
indebtedness of approximately $2,801,000 and $109,000, respectively, with a new
mortgage of $7,025,000. The mortgage was refinanced at a rate of 7.22% compared
to the prior rate of 7.60%. Payments of approximately $55,000 are due on the
first day of each month until the loan matures on January 1, 2021 at which time
the loan will be fully amortized. Capitalized loan costs incurred on the
refinancing were approximately $158,000 as of December 31, 2000. During 2001,
additional loan costs of approximately $14,000 were incurred. Under the terms of
the previous loan agreements, the partnership incurred prepayment penalties of
approximately $104,000. Along with the prepayment penalties, the partnership
wrote off unamortized loan costs of approximately $26,000 and mortgage
amortization discounts of approximately $64,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $194,000.
The refinancing of Willowick Apartments replaced first and second mortgage
indebtedness of approximately $1,094,000 and $43,000, respectively, with a new
mortgage of $3,110,000. The mortgage was refinanced at a rate of 7.22% compared
to the prior rate of 7.60%. Payments of approximately $25,000 are due on the
first day of each month until the loan matures on January 1, 2021 at which time
the loan will be fully amortized. Capitalized loan costs incurred on the
refinancing were approximately $75,000 as of December 31, 2000. During 2001,
additional loan costs of approximately $12,000 were incurred. Under the terms of
the previous loan agreements, the partnership incurred prepayment penalties of
approximately $41,000. Along with the prepayment penalties, the partnership
wrote off unamortized loan costs of approximately $16,000 and mortgage
amortization discounts of approximately $24,000 resulting in an extraordinary
loss on early extinguishment of debt of approximately $81,000.
AVERAGE RENTAL RATES AND OCCUPANCY. The following shows the average annual
rental rates and annual occupancy rates for your partnership's property during
the periods indicated.
PROPERTY AVERAGE ANNUAL RENT AVERAGE ANNUAL OCCUPANCY RATE
2001 2000 2001 2000
---- ---- ---- ----
Colony House $7,937 $7,950 87% 91%
Essex Park $6,844 $6,615 92% 92%
North River Village $10,245 $9,920 94% 93%
Willowick $6,357 $6,075 94% 96%
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.
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DISTRIBUTIONS. The following table shows, for each of the years indicated,
the distributions paid per unit for such years.
YEAR ENDED DECEMBER 31, AMOUNT
1999 $ 13.95
2000 134.62
2001 26.05
2002 (through April 30) 1.94
--------
Total $ 176.56
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 34,841, or 62.71%, of the outstanding limited partner
units of your partnership, along with an approximate 1% general partnership
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 partnership's
general partner and its affiliates on a historical basis. The general partner is
reimbursed for actual direct costs and expenses incurred in connection with the
operation of the partnership. The property manager is entitled to receive fees
for transactions involving your partnership and its property and is entitled to
receive five percent of the gross receipts from the partnership's residential
property for providing property management services.
PARTNERSHIP PROPERTY
YEAR FEES AND EXPENSES MANAGEMENT FEES
---- ----------------- ---------------
2000 $524,000 $291,000
2001 $652,000 $302,000
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. In addition, you should note the following
with respect to the specific litigation affecting your partnership.
Background
In March 1998, unit holders of limited partnership units in the
partnerships managed by affiliates of Insignia Financial Group (collectively,
"Insignia") commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo (the "Court"). The plaintiffs
named as defendants, among others, your partnership, its general partner and
several of their affiliated partnerships and corporate entities, as well as
AIMCO, who had announced a merger with Insignia. The action originally asserted
claims on behalf of a putative class of limited partners in over 50 limited
partnerships, including your partnership (collectively, the "Partnerships") and
derivatively on behalf of those same Partnerships (which are named as nominal
defendants) challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia; past tender offers by Insignia to
acquire limited partnership units; Insignia's management of the Partnerships;
and the series of transactions which closed on October 1, 1998 and February 26,
1999 whereby Insignia and Insignia Properties Trust, respectively, were merged
into AIMCO (hereinafter, the "Insignia Merger").
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Procedural History
On June 25, 1998, your general partner filed a motion seeking dismissal of
the action. In lieu of responding to the motion, the plaintiffs filed an amended
complaint. The general partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement, settling claims, subject to court approval, on behalf
of your partnership and all limited partners who owned units as of November 3,
1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Court, at which time the Court set a final approval hearing for
December 10, 1999. Prior to the December 10, 1999 hearing, the Court received
various objections to the settlement, including a challenge to the Court's
preliminary approval based upon the alleged lack of authority of prior lead
counsel to enter the settlement.
On December 14, 1999, the general partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiffs' lead and liaison counsel who
negotiated the proposed settlement on behalf of plaintiffs. On June 27, 2000,
the Court entered an order disqualifying them from the case. An appeal was taken
from part of the June 27, 2000 order on October 5, 2000. Subsequently, certain
plaintiffs, specifically, BEJ Equity Partners and J-B Investment Partners,
withdrew as plaintiffs.
On December 4, 2000, the Court appointed the law firm of Lieff Cabraser
Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative
class. Plaintiffs filed a third amended complaint on January 19, 2001 and the
general partner and its affiliates filed a demurrer to the third amended
complaint. On July 10, 2001, the Court issued an order granting in part and
denying in part defendants' demurrer. Among other things, the Court sustained
defendants' demurrer without leave to amend as to those derivative claims
involving partnerships in which the named plaintiffs did not own an interest.
The Court subsequently denied plaintiffs' motion for reconsideration.
During the third quarter of 2001, a complaint (the "Heller action") was
filed against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. The Heller complaint was filed in order to
preserve the derivative claims that were dismissed without leave to amend in the
Nuanes action by the Court's July 10, 2001 Order. The first amended complaint in
the Heller action was brought as a purported derivative action, and asserted
claims for among other things breach of fiduciary duty; unfair competition;
conversion, unjust enrichment; and judicial dissolution. On January 28, 2002,
however, the Court, on motion by the general partner and its affiliates, struck
the Heller complaint as a violation of its July 10, 2001 order in the Nuanes
action. On March 27, 2002, plaintiffs in the Heller action filed a notice of
appeal of the Court's January 28, 2002 order striking the complaint.
Current Complaint
The fourth amended complaint, which is the current complaint in the
action, was filed on September 7, 2001. The plaintiffs own interests in only
four of the 50 partnerships at issue. Plaintiffs Jeffrey Homburger, Sean
O'Reilly and Norman and Doris Rosenberg formally withdrew from the case on
August 20, 2001. The general partner and affiliated defendants filed a demurrer
to the fourth amended complaint, which the Court granted in part on January 28,
2002. The Court dismissed without leave to amend plaintiffs' state securities
fraud claim under California's Corporate Code Section 25400(b), plaintiffs'
contract claim arising out of the partnership agreements, plaintiffs' derivative
claim for statutory unfair competition as to those partnerships in which
plaintiffs lack representation, plaintiffs' conversion claim and plaintiffs'
claim under California's Corporation Code Section 15636.
Only some of the remaining claims in the fourth amended complaint relate
to the partnership. Plaintiffs have alleged that affiliates of the general
partner have issued false and misleading tender offers beginning in 1998 and
continuing through to the present for units in the partnership. Plaintiffs
allege violations of state securities fraud statutes and common law fraud
against both AIMCO and Insignia. Specifically, plaintiffs allege that the tender
offers have been misleading because they failed to disclose:
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- that third parties would not use a property's historical income, but
would instead use a property's projected income, in calculating a
property's value based on the capitalization method.
- that the property income figures used in the capitalization method
were artificially lower because AIMCO charges management fees
allegedly in excess of the market.
- that AIMCO allegedly deducted all capital expenditures from property
income despite an alleged AIMCO policy of deducting only $250 to
$300 per apartment unit.
- the rating for the condition of each property, any adjustment made
to the capitalization rate as a result, the interest rate on
mortgage debt for each property and any corresponding adjustments in
the capitalization rates.
- that AIMCO allegedly negotiated lower capitalization rates for
valuing properties it owns in connection with a revolving credit
facility.
- that AIMCO failed to disclose that the valuation methods and/or
policies it used for its own business purposes allegedly differ from
those used in the tender offers.
- internal valuations of the properties it used in connection with the
Insignia merger or the capitalization rates used in connection with
those valuations.
Plaintiffs have alleged that the general partner breached its fiduciary duty by
assisting Insignia and AIMCO in making the tender offers by providing financial
information, failing to correct supposedly misleading information given to
unitholders, recommending that the prices offered were fair and preventing third
parties from making tender offers. Plaintiffs have also included a statutory
unfair competition claim against all the defendants, a claim for tortious
interference with contract, unjust enrichment and judicial dissolution.
On February 20, 2002, defendants filed a general denial of the material
allegations of the fourth amended complaint, denying each and every material
allegation and asserting several affirmative defenses.
Pending Motion For Class Certification
On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have ever
owned units in your partnership or others. The partnership's general partner and
affiliated defendants oppose certification of such a class and filed an
opposition brief on March 26, 2002. On April 29, 2002, the Court heard argument
on the motion for class certification. The Court ordered additional briefing and
will take the matter under submission at that time.
We cannot predict the outcome of these actions or the nature of any final
relief or settlement (if any) with respect to these actions, including without
limitation whether the actions discussed above will result in damages being
assessed against the general partner, AIMCO Properties, or any of the
defendants, nor the amount of any such damages. AIMCO Properties, the general
partner, and the affiliated defendants have contested the claims and will
vigorously defend the actions. Nevertheless, depending on the outcome of the
existing actions and appeal, current limited partners may later benefit from an
award of damages or from a settlement of the claims at issue.
Although we cannot predict the outcome of these actions, including the
nature, if any, of any final relief or settlement, a limited partner who tenders
his units in the offer may not be able to participate in or benefit from any
such later relief or settlement. Limited partners will be expected to assign any
claims they have to the Purchaser as a condition of tendering their units. There
can be no assurance that a limited partner would not realize greater value for
his units by holding on to his units at this time and waiting for any such
relief or settlement in the future. We advise you to consult legal counsel if
you have any questions.
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Potential Settlement Discussions
Although the parties have had discussions about structuring a potential
settlement to include tender offers at potentially higher prices than are
currently being offered, the parties have been unable to reach agreement upon
the terms of such a potential settlement.
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., Chicago, Illinois, and New
York, New York. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Your partnership's most recent SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov.
The above discussion relating to capital expenditures at the properties
and valuations of the properties are forward-looking information developed by
the general partner. These expectations incorporated various assumptions
including, but not limited to, revenue (including occupancy rates), various
operating expenses, general and administrative expenses, depreciation expenses,
and working capital levels. While the general partner deemed such expectations
to be reasonable and valid at the date made, there is no assurance that the
assumed facts will be validated or that the results will actually occur. Any
estimate of the future performance of a business, such as your partnership's
business, is forward-looking and based on assumptions some of which inevitably
will prove to be incorrect.
14. VOTING POWER.
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our subsidiary, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units must approve certain
extraordinary transactions, including most amendments to the partnership
agreement and the sale of all or substantially all of your partnership's assets.
Because we and our affiliates own a majority of the outstanding units, we
control most voting decisions made by limited partners.
15. SOURCE OF FUNDS.
We expect that approximately $1,592,561 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 $11,000). For more information regarding fees
and expenses, see "The Offer - - Section 19. Fees and Expenses."
We have a $400 million revolving credit facility with Bank of America,
Fleet National Bank and First Union National Bank with a syndicate comprised of
a total of ten 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,
and a first priority 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.
Commencing August 1, 2002, through maturity the margin will range between 1.60%
and 2.35%, in the case of LIBOR based loans, and between 0.20% and 0.95% in the
case of base rate loans, based upon a fixed charge coverage ratio. The credit
facility expires in July 2004 and can be extended at AIMCO's option for a
one-year term.
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 offers. As of
March 31, 2002, we had $107.3 million of cash on hand and $165.3 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.
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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:
- any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the
business, properties, assets, liabilities, indebtedness,
capitalization, condition (financial or otherwise), operations,
licenses or franchises, management contract, or results of
operations or prospects of your partnership or local markets in
which your partnership owns property, including any fire, flood,
natural disaster, casualty loss, or act of God that, in our
reasonable judgment, are or may be materially adverse to your
partnership or the value of the units to us, or we shall have become
aware of any facts relating to your partnership, its indebtedness or
its operations which, in our reasonable judgment, has or may have
material significance with respect to the value of your partnership
or the value of the units to us; or
- 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
- there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local
or foreign government, governmental authority or governmental
agency, or by any other person, before any governmental authority,
court or regulatory or administrative agency, authority or tribunal,
which (i) challenges or seeks to challenge our purchase of the
units, restrains, prohibits or delays the making or consummation of
our offer, prohibits the performance of any of the contracts or
other arrangements entered into by us (or any affiliates of ours),
or seeks to obtain any material amount of damages as a result of the
transactions contemplated by our offer, (ii) seeks to make the
purchase of, or payment for, some or all of the units pursuant to
our offer illegal or results in a delay in our ability to accept for
payment or pay for some or all of the units, (iii) seeks to prohibit
or limit the ownership or operation by us or any of our affiliates
of the entity serving as general partner of your partnership or to
remove such entity as general partner of your partnership, or seeks
to impose any material limitation on our ability or the
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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
- 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
- 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
- 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
- the offer to purchase may have an adverse effect on AIMCO's status
as a REIT; or
- 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
-35-
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 OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
-36-
We have filed with the SEC a Tender Offer Statement on Schedule TO,
pursuant to Section 14(d)(1) and Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to our offer, and may file
amendments thereto. Your partnership has filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to Section
14(d)(4) and Rule 14d-9 under the Exchange Act, furnishing certain additional
information about your partnership's and the general partner's position
concerning our offer, and your partnership may file amendments thereto. The
Schedules TO and 14D-9 and any amendments to either Schedule, including
exhibits, may be inspected and copies may be obtained at the same place and in
the same manner as described in "The Offer-Section 13. Certain Information
concerning your Partnership--Additional Information concerning your
Partnership."
The acknowledgment and agreement and any other required documents should
be sent or delivered by each limited partner or such limited partner's broker,
dealer, bank, trust company or other nominee to the Information Agent at one of
its addresses set forth below.
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THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
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.
By facsimile: For information please call:
(201) 896-0910 TOLL FREE (888) 349-2005
Or
(201) 896-1900
-38-
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.
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
Paul J. McAuliffe.............................. Executive Vice President and Chief Financial Officer
Ron Monson..................................... Executive Vice President and Head of Property Operations
David Robertson................................ Executive Vice President - Affordable Properties
James N. Bailey................................ Director
Richard S. Ellwood............................. Director
J. Landis Martin............................... Director
Thomas L. Rhodes............................... Director
Annex I - Page 1
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.
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 Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as Vice
President and Deputy General Counsel of NHP from June 1991 to March
1994 and as Associate General Counsel of NHP Incorporated from 1986
to 1991. From 1983 to 1985, Mr. Bonder was with the Washington,
D.C. law firm of Lane & Edson, P.C. From 1979 to 1983, Mr. Bonder
practiced with the Chicago law firm of Ross and Hardies. Mr. Bonder
received an A.B. from the University of Rochester and a J.D. from
Washington University School of Law.
Annex I - Page 2
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.
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.
Annex I - Page 3
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.
David Robertson..................... Mr. Robertson was appointed Executive Vice President - Affordable
Properties in February 2002. He is responsible for affordable
property operations, refinancing and other value creation within the
Company's affordable portfolio. Prior to joining the Company, Mr.
Robertson was a member of the investment-banking group at Smith
Barney from 1991 to 1996, where he was responsible for real estate
investment banking transactions in the western United States, and
was part of the Smith Barney team that managed AIMCO's initial
public offering in 1994. Since February 1996, Mr. Robertson has
been Chairman and Chief Executive Officer of Robeks Corporation, a
privately held chain of specialty food stores.
James N. Bailey..................... Mr. Bailey was appointed a Director of AIMCO in June 2000. In 1973,
Cambridge Associates, Inc. Mr. Bailey co-founded Cambridge Associates, Inc., which is an
1 Winthrop Square, investment consulting firm for non-profit institutions and wealthy
Suite 500 family groups. He is also Co-Founder, Treasurer and Director of The
Boston, MA 02110 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.
Annex I - Page 4
Richard S. Ellwood.................. Mr. Ellwood was appointed a Director of AIMCO in July 1994 and is
12 Auldwood Lane currently Chairman of the Audit Committee and a member of the
Rumson, NJ 07660 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.
J. Landis Martin.................... Mr. Martin was appointed a director of AIMCO in July 1994 and became
199 Broadway Chairman of the Compensation Committee on March 19, 1998. Mr.
Suite 4300 Martin is a member of the Audit Committee. Mr. Martin has served as
Denver, CO 80202 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 and is a
215 Lexington Avenue member of the Audit and Compensation Committees. Mr. Rhodes has
4th Floor served as the President and a Director of National Review magazine
New York, NY 10016 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.
Annex I - Page 5
ANNEX II
LETTER OF TRANSMITTAL
TO TENDER UNITS OF LIMITED PARTNERSHIP INTEREST IN
SHELTER PROPERTIES III (THE "PARTNERSHIP")
PURSUANT TO AN OFFER TO PURCHASE
DATED MAY 8, 2002 (THE "OFFER DATE")
BY
AIMCO PROPERTIES, L.P.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT MIDNIGHT, NEW YORK TIME,
ON JUNE 6, 2002, 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.
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
By Facsimile:
(201) 896-0910
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.
Annex II - Page 1
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 to
purchase, 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 to purchase 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 TO
PURCHASE, 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 TO PURCHASE, 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 HIS OWNERSHIP 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, DAMAGES PAID IN CONNECTION WITH ANY
EXISTING OR FUTURE LITIGATION AND ALL OTHER DISTRIBUTIONS AND PAYMENTS MADE 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 PAST, PRESENT AND FUTURE
CLAIMS, IF ANY, OF THE SIGNATORY WHETHER ON BEHALF OF THE PARTNERSHIP,
INDIVIDUALLY OR ON BEHALF OF A PUTATIVE CLASS (INCLUDING WITHOUT LIMITATION ANY
CLAIMS AGAINST LIMITED PARTNERS OF THE PARTNERSHIP, THE GENERAL PARTNER(S)
AND/OR ANY AFFILIATES THEREOF) UNDER, ARISING OUT OF OR RELATED TO THE
PARTNERSHIP AGREEMENT, THE PURCHASE AGREEMENT, THE SIGNATORY'S STATUS AS A
LIMITED PARTNER, THE TERMS OR CONDITIONS OF THE OFFER TO PURCHASE, THE
MANAGEMENT OF THE PARTNERSHIP, MONIES LOANED OR ADVANCED, SERVICES RENDERED TO
THE PARTNERSHIP OR ITS PARTNERS, OR ANY OTHER CLAIMS ARISING OUT OF OR RELATED
TO THE SIGNATORY'S OWNERSHIP OF UNITS IN THE PARTNERSHIP.
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
Annex II - Page 2
time, to one or more of its affiliates, the right to purchase Units tendered
pursuant to the offer to purchase, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the offer to purchase or
prejudice the rights of tendering limited partners to receive payment for Units
validly tendered and accepted for payment pursuant to the offer to purchase.
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 to purchase 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 to purchase. The Signatory
recognizes that under certain circumstances set forth in the offer to purchase,
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 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 TO PURCHASE MAY BE
WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE OR ON OR AFTER JULY 8, 2002
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 TO PURCHASE. THE SIGNATORY HAS MADE HIS OR HER OWN DECISION TO TENDER
UNITS. THE SIGNATORY ALSO REPRESENTS AND WARRANTS THAT HE OR SHE WAS ADVISED TO
CONSULT AN ATTORNEY WITH RESPECT TO HIS OR HER DECISION WHETHER TO TENDER
HIS/HER INTEREST(S).
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.
Annex II - Page 3
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).
-1-
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 30% 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.
-2-
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 30%
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.
-3-
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.
- -------------------------------------------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE TAXPAYER IDENTIFICATION
NUMBER OF - -
- -------------------------------------------------------------------------------------------------------------------
1. An individual account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
Funds, the first individual on the account
3. Husband and wife (joint account) The actual owner of the account or, if joint funds,
Either person
4. Custodian account of a minor (Uniform Gift to 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
(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.
-1-
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
30% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER - - If
you fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING - - If
you make a false statement with no reasonable basis that results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION - - Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
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The Acknowledgment and Agreement and any other documents required by the
Letter of Transmittal should be sent or delivered by each limited partner or
such limited partner's broker, dealer, bank, trust company or other nominee to
the Information Agent at one of its addresses set forth below.
THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
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.
By facsimile: For information please call:
(201) 896-0910 TOLL FREE (888) 349-2005
Or
(201) 896-1900
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