AIMCO
AIMCO Properties, L.P.
is offering to purchase limited partnership units in
Drexel Burnham Lambert Real Estate Associates II FOR
$77.00 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.
In addition, if units are validly tendered (and not properly withdrawn) and the
purchase of those units would result in there being fewer than 320 unitholders
in your partnership, we will not purchase any of the units tendered, terminate
the offer and return all units to the tendering limited partners. See "The
Offer--Section 2. Acceptance for Payment and Payment for Units" and "Section
17. Conditions of the Offer."
Our offer and your withdrawal rights will expire at midnight, New York City
time, on September 17, 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 3 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 $77.00 per unit without any arms-length
negotiations. Accordingly, our offer price may not reflect the fair
market value of your units.
- - 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)
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If you decide to accept our offer, you should complete and sign the
enclosed acknowledgment and agreement as instructed in the letter of
transmittal, 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 OR (201) 896-1900.
August 20, 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.
- - As described in more detail herein, pursuant to your partnership's
agreement of limited partnership, limited partners are entitled to an 8%
cumulative preferred return on their unrecovered invested capital. As of
December 31, 2001, the unpaid preferred return arrearage totaled
approximately $9,741,000. Although no assurances can be given that your
partnership will be able to make any preferred return payments or, if
any such payments are made, when they will be made, a limited partner
who tenders his units in the offer will not receive his allocable share
of the preferred return arrearage. 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 such payments in the
future. See "The Offer -- Section 13. Certain Information Concerning
Your Partnership."
- - 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.
- - If we acquire a substantial number of units, we will increase our
ability to influence voting decisions with respect to your partnership
and may control such voting decisions, including but not limited to the
removal of the general partner of your partnership and most amendments
to the partnership agreement.
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) 460-2889 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 will not be able to receive your allocable share of
the unpaid preferred arrearage............................................................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 be less than 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 partnership interests or
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 faces conflicts of interest relating to management fees...............5
Your general partner is not making a recommendation with respect to this offer.............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
If we acquire a substantial number of units in this offer, we could control your
partnership...............................................................................6
You could recognize gain in the event of a reduction in your partnership's liabilities.....6
You may be unable to transfer your units for a 12-month period.............................6
We may delay our acceptance of, and payment for, your units................................6
THE OFFER 7
Section 1. Terms of the Offer; Expiration Date; Proration.................................7
Section 2. Acceptance for Payment and Payment for Units...................................7
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..........................................................15
Section 8. Information Concerning Us and Certain of our Affiliates.......................16
Section 9. Background and Reasons for the Offer..........................................19
Section 10. Position of the General Partner of your Partnership with respect to the Offer.24
Section 11. Conflicts of Interest and Transactions with Affiliates........................25
Section 12. Future Plans of the Purchaser.................................................26
Section 13. Certain Information concerning your Partnership...............................27
Section 14. Voting Power..................................................................32
Section 15. Source of Funds...............................................................32
Section 16. Dissenters' Rights............................................................33
Section 17. Conditions of the Offer.......................................................33
Section 18. Certain Legal Matters.........................................................35
Section 19. Fees and Expenses.............................................................36
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 Drexel Burnham Lambert Real Estate
Associates II, your partnership, for $77.00 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 $77.00, based on the pro forma operating
results of your partnership for the six months ended June 30,
2002, as capitalized using the direct capitalization method and
using a capitalization rate of 10.18%.
- 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."
- - EXPIRATION DATE. Our offer expires on September 17, 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 October 18, 2002 if we have
not already accepted units for purchase and payment. See "The
Offer--Section 4. Withdrawal Rights."
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- - 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, the absence of certain changes in the
financial markets, and there being at least 320 unit holders outstanding
upon the consummation of the offer. See "The Offer--Section 7. Effects
of the Offer," and "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." We and our affiliates
currently own 11,323 units, or 30.07%, of the outstanding units of your
partnership.
- - CONFLICTS OF INTEREST; MANAGEMENT FEES. 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 because, if your partnership were liquidated, your general
partner would not continue to receive the fees it currently receives.
But we do not believe that the liquidation of your partnership is in the
best interest of the unitholders and therefore believe that the fees
paid to the general partner would continue even if the offer were not
consummated. See "The Offer--Section 11. Conflicts of Interest and
Transactions with Affiliates" and "The Offer--Section 13. Certain
Information Concerning Your Partnership."
- - CERTAIN POSSIBLE PAYMENTS BY YOUR PARTNERSHIP. As described in more
detail herein, pursuant to your partnership's agreement of limited
partnership, limited partners are entitled to an 8% cumulative preferred
return on their unrecovered invested capital. As of December 31, 2001,
the unpaid preferred return arrearage totaled approximately $9,741,000.
Although no assurances can be given that your partnership will be able
to make any preferred return payments or, if any such payments are made,
when they will be made, a limited partner who tenders his units in the
offer will not receive his allocable share of the preferred return
arrearage. 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 such payments in the future. 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."
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- - 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."
- - 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 WILL NOT BE RECEIVE THE PREFERRED RETURN ON
YOUR UNRECOVERED INVESTED CAPITAL.
As described in more detail herein, pursuant to your partnership's
agreement of limited partnership, limited partners are entitled to an 8%
cumulative preferred return on their unrecovered invested capital. As of
December 31, 2001, the unpaid preferred return arrearage totaled approximately
$9,741,000. Although no assurances can be given that your partnership will be
able to make any preferred return payments or, if any such payments are made,
when they will be made, a limited partner who tenders his units in the offer
will not receive his allocable share of the preferred return arrearage. 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 such payments
in the future. See "The Offer -- Section 13. Certain Information Concerning Your
Partnership."
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 BE LESS THAN 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 upon a sale of your units in an open market. Such prices could be higher
than our offer price. You should note in particular that we purchased four units
on June 20, 2002, in a private purchase for $67.00 per unit. Also, units of your
partnership have been purchased since January 1, 2000 in secondary markets for
prices up to $99.75 per unit as reported by The Partnership Spectrum (see
"Section 9. Background and Reasons for the Offer -- Prices on Secondary
Markets") and by us in tender offers for prices up to $67.00 per unit (see
"Section 9. Background and Reasons for the Offer -- Prior Tender Offers").
OUR OFFER PRICE DOES NOT REFLECT FUTURE PROSPECTS.
Our offer price is based on your partnership's pro forma operating
results for the six months ended June 30, 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 or less than our estimate. Other persons could derive different
estimates of the liquidation value. If your partnership were to sell its assets
and liquidate, the value of the assets would be determined through negotiations
with third parties, who may use different valuation methods to determine the
price of your partnership's assets. Accordingly, our offer price could be higher
or lower 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 PARTNERSHIP
INTERESTS OR 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, pursuant to which units in your partnership
were sold, indicated that it was anticipated that the partnership's properties
would be sold within three to seven years of their acquisition, provided market
conditions permit. The prospectus also indicated that there would be no
assurance that the partnership would be able to liquidate and that, unless
sooner terminated as provided in the
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partnership agreement, the existence of the partnership would continue until the
year 2032. It is not known when the property owned by your partnership may be
sold. 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 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 the partners 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 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 it is entitled for services provided to your partnership.
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.
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
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units. Therefore, depending on your basis in the units and your tax position,
your taxable gain and any tax liability resulting from a sale of units to us
pursuant to the offer could exceed our offer price. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor to determine the tax consequences of the offer to
you.
IF YOU TENDER UNITS TO US IN THIS OFFER, YOU WILL NO LONGER BE ENTITLED TO
DISTRIBUTIONS FROM YOUR PARTNERSHIP.
If you tender your units in response to our offer, you will transfer to
us all right, title and interest in and to all of the units we accept, and the
right to receive all distributions in respect of such units on and after the
date on which we accept such units for purchase. Accordingly, for any units that
we acquire from you, you will not receive any future distributions from
operating cash flow of your partnership or upon a sale or refinancing of the
property owned by your partnership.
IF WE ACQUIRE A SUBSTANTIAL NUMBER OF UNITS IN THIS OFFER, WE COULD CONTROL YOUR
PARTNERSHIP.
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our subsidiary, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units must approve certain
extraordinary transactions, including the removal of the general partner, most
amendments to the partnership agreement and the sale of all or substantially all
of your partnership's assets. We and our affiliates own 11,323 units, or 30.07%,
of the outstanding limited partner units of your partnership. If we acquire more
than an additional 19.62% of the outstanding limited partner units, we and our
affiliates will own a majority of the outstanding limited partner units and will
have the ability to control such votes of the limited partners.
YOU COULD RECOGNIZE GAIN IN THE EVENT OF A REDUCTION IN YOUR PARTNERSHIP'S
LIABILITIES.
Generally, a decrease in your share of partnership liabilities is
treated, for federal income tax purposes, as a deemed cash distribution.
Although the general partner of your partnership does not have any current plan
or intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause the
general partner to reduce the liabilities of your partnership. If you retain all
or a portion of your units and the liabilities of your partnership were to be
reduced, you would be treated as receiving a hypothetical distribution of cash
resulting from a decrease in your share of the liabilities of the partnership.
Any such hypothetical distribution of cash would be treated as a nontaxable
return of capital to the extent of your adjusted tax basis in your units and
thereafter as gain. Gain recognized by you on the disposition of retained units
with a holding period of 12 months or less may be classified as short-term
capital gain and subject to taxation at ordinary income tax rates.
YOU MAY BE UNABLE TO TRANSFER YOUR UNITS FOR A 12-MONTH PERIOD.
Your partnership's agreement of limited partnership prohibits any
transfer of an interest if such transfer, together with all other transfers
during the preceding 12 months, would cause 50% or more of the total interest in
capital and profits of your partnership to be transferred within such 12-month
period. During the last 12 months, approximately 6.5% of the total interest in
capital and profits of your partnership have been transferred. If more than
16,214 units, representing 43.5% of the outstanding units, are validly tendered
and not withdrawn, we will accept for payment and pay for those units so
tendered pro rata according to the number of units so tendered, with appropriate
adjustments to avoid purchases of fractional units. If we acquire a significant
percentage of the interest in your partnership, you may not be able to transfer
your units for a 12-month period following our offer.
WE MAY DELAY OUR ACCEPTANCE OF, AND PAYMENT FOR, YOUR UNITS.
We reserve the right to extend the period of time during which our offer
is open and thereby delay acceptance for payment of any tendered units. The
offer may be extended indefinitely, and no payment will be made in respect of
tendered units until the expiration of the offer and acceptance of units for
payment.
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THE OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.
We are offering to acquire limited partnership units in your partnership
for $77.00 per unit in cash, upon the terms and subject to the conditions of the
offer. The purchase price per unit will be automatically 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
the units.
If, prior to the expiration date we increased the consideration offered
pursuant to the offer, everyone whose units are accepted in the offer will
receive the increased consideration, regardless of whether the units were
tendered prior to the increase in offer consideration.
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 September 17, 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.
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."
The offer is not conditioned upon any minimum number of units being
tendered. However, the offer is conditioned on satisfaction of certain
conditions, including among other things, there being at least 320 unitholders
remaining after our purchase of all units validly tendered and not properly
withdrawn prior to the expiration date in accordance with the procedures set
forth in "The Offer--Section 4. Withdrawal Rights." 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) 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. In accordance with the terms of
the partnership agreement, the transfer of the units will be effective as of the
first day of the fiscal quarter following the date on which the general partner
approves the transfer.
This offer is being mailed on or about August 20, 2002 to the persons
shown by your partnership's records to have been limited partners or, in the
case of units owned of record by individual retirement accounts and qualified
plans, beneficial owners of units as of August 13, 2002.
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. The purchase price per unit will
automatically be reduced by the
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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. 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 indefinitely, the transfer of ownership of the
units on the partnership books.
Your partnership's agreement of limited partnership prohibits any
transfer of an interest if such transfer, together with all other transfers
during the preceding 12 months, would cause 50% or more of the total interest in
capital and profits of your partnership to be transferred within such 12 month
period. During the last 12 months, approximately 6.5% of the total interest in
capital and profits of your partnership have been transferred. If more than
16,214 units, representing 43.5% of the outstanding units, are validly tendered
and not withdrawn, we will accept for payment and pay for those units so
tendered pro rata according to the number of units so tendered, with appropriate
adjustments to avoid purchases of fractional units.
If the number of units validly tendered and not properly withdrawn on or
prior to the expiration date is less than or equal to the maximum number we can
purchase under the partnership agreement, we will purchase all units so tendered
and not withdrawn, upon the terms and subject to the conditions of the offer.
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 Securities Exchange Act of 1934 (the
"Exchange Act") to pay limited partners the purchase price in respect of units
tendered or return those units promptly after termination or withdrawal of the
offer, we do not intend to pay for any units accepted for payment pursuant to
the offer until the final proration results are known. Notwithstanding any such
delay in payment, no interest will be paid on the offer price.
For purposes of the offer, we will be deemed to have accepted for
payment pursuant to the offer, and thereby purchased, validly tendered units,
if, as and when we give verbal or written notice to the Information Agent of our
acceptance of those units for payment pursuant to the offer. Payment for units
accepted for payment pursuant to the offer will be made through the Information
Agent, which will act as agent for tendering limited partners for the purpose of
receiving cash payments from us and transmitting cash payments to tendering
limited partners.
If any tendered units are not accepted for payment by us for any reason,
the acknowledgment and agreement with respect to such units not purchased may be
destroyed by the Information Agent or us or returned to you. You may withdraw
tendered units until the expiration date (including any extensions). In
addition, if we have not accepted units for payment by October 18, 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.
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3. PROCEDURE FOR TENDERING UNITS.
VALID TENDER. To validly tender units pursuant to the offer, a properly
completed and duly executed acknowledgment and agreement and any other documents
required by the letter of transmittal attached as Annex II must be received by
the Information Agent, at one of its addresses set forth on the back cover of
this offer to purchase, on or prior to the expiration date. You may tender all
or any portion of your units. No alternative, conditional or contingent tenders
will be accepted.
SIGNATURE REQUIREMENTS. If the acknowledgment and agreement is signed by
the registered holder of a unit and payment is to be made directly to that
holder, then no signature guarantee is required on the acknowledgment and
agreement. Similarly, if a unit is tendered for the account of a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc. or a commercial bank, savings bank, credit union,
savings and loan association or trust company having an office, branch or agency
in the United States (each an "Eligible Institution"), no signature guarantee is
required on the acknowledgment and agreement. However, in all other cases, all
signatures on the acknowledgment and agreement must be guaranteed by an Eligible
Institution.
In order for you to tender in the offer, your units must be validly
tendered and not withdrawn on or prior to the expiration date.
THE METHOD OF DELIVERY OF THE ACKNOWLEDGMENT AND AGREEMENT AND ALL OTHER
REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing the acknowledgment
and agreement, you are irrevocably appointing us and our designees as your
proxy, in the manner set forth in the acknowledgment and agreement and each with
full power of substitution, to the fullest extent of your rights with respect to
the units tendered by you and accepted for payment by us. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, we accept the tendered
units for payment. Upon such acceptance for payment, all prior proxies given by
you with respect to the units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). We and our
designees will, as to those units, be empowered to exercise all voting and other
rights as a limited partner as we, in our sole discretion, may deem proper at
any meeting of limited partners, by written consent or otherwise. We reserve the
right to require that, in order for units to be deemed validly tendered,
immediately upon our acceptance for payment of the units, we must be able to
exercise full voting rights with respect to the units, including voting at any
meeting of limited partners and/or limited partners then scheduled or acting by
written consent without a meeting. By executing the acknowledgment and
agreement, you agree to execute all such documents and take such other actions
as shall be reasonably required to enable the units tendered to be voted in
accordance with our directions. The proxy and power of attorney 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
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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.
ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS. By executing the
acknowledgment and agreement, you will irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, AIMCO Properties, all of your
right, title and interest in and to such units tendered that are accepted for
payment pursuant to the offer, including, without limitation, (i) all of your
interest in the capital of your partnership, and interest in all profits, losses
and distributions of any kind to which you shall at any time be entitled in
respect of your ownership in 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 you and
accepted for payment and thereby purchased by us; (ii) all other payments, if
any, due or to become due to you in respect of the units, under or arising out
of your partnership's agreement of limited partnership 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 your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership, the Purchase Agreement or your
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 your partnership; and (iv) all of your past,
present and future claims, if any, whether on behalf of your 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 your
partnership's agreement of limited partnership, the Purchase Agreement, your
status as a limited partner, the terms or conditions of this offer, the
management of your partnership, monies loaned or advanced, services rendered to
your partnership or its partners, or any other claims arising out of or related
to your ownership of the units. 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
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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 our acceptance
of such units for payment.
For a withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at one of its addresses set forth on
the back cover of the offer to purchase. Any such notice of withdrawal must
specify the name of the person who tendered, the number of units to be withdrawn
and the name of the registered holder of such units, if different from the
person who tendered. In addition, the notice of withdrawal must be signed by the
person who signed the acknowledgment and agreement in the same manner as the
acknowledgment and agreement was signed.
If purchase of, or payment for, a unit is delayed for any reason, or if
we are unable to purchase or pay for a unit for any reason, then, without
prejudice to our rights under the offer, tendered units may be retained by the
Information Agent; subject, however, to our obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of our
offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of our offer. However, withdrawn units may be
re-tendered at any time prior to the expiration date by following the procedures
described in "The Offer--Section 3. 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
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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.
The offer may be extended or delayed and no payment will be made in
respect of the tendered units until the expiration of the offer and the
acceptance of units for payment. If we extend the offer, or if we delay payment
for a unit (whether before or after its acceptance for payment) or are unable to
pay for a unit pursuant to our offer for any reason, then, without prejudice to
our rights under the offer, the Information Agent may retain tendered units and
those units may not be withdrawn except to the extent tendering limited partners
are entitled to withdrawal rights as described in "The Offer--Section 4.
Withdrawal Rights," subject, however, to our obligation, pursuant to Rule
14e-l(c) under the Exchange Act, to pay the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of the
offer.
If we make a material change in the terms of our offer, or if we waive a
material condition to our offer, we will extend the offer and disseminate
additional tender offer materials to the extent required by Rules 14d-4 and
14e-1 under the Exchange Act. The minimum period during which the offer must
remain open following any material change in the terms of the offer, other than
a change in price or a change in percentage of securities sought or a change in
any dealer's soliciting fee, if any, will depend upon the facts and
circumstances, including the materiality of the change, but generally will be
five business days. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in any
dealer's soliciting fee, if any, a minimum of ten business days from the date of
such change is generally required to allow for adequate dissemination to limited
partners. Accordingly, if, prior to the expiration date, we increase (other than
increases of not more than two percent of the outstanding units) or decrease the
number of units being sought, or increase or decrease the offer price, and if
the offer is scheduled to expire at any time earlier than the tenth business day
after the date that notice of such increase or decrease is first published, sent
or given to limited partners, the offer will be extended at least until the
expiration of such ten business days. As used in the offer to purchase,
"business day" means any day other than a Saturday, Sunday or a Federal holiday,
and consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time.
Pursuant to Rule 14d-11 under the Exchange Act, subsequent offering
periods may be provided in tender offers for "any and all" outstanding units of
a partnership. A subsequent offering period is an additional period of from
three to twenty business days following the expiration date of the offer,
including any extensions, in which limited partners may continue to tender units
not tendered in the offer for the offer price. Because of the remote possibility
that we may purchase fewer than all units tendered, 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.
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THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF A LIMITED PARTNER
PARTICIPATING IN THE OFFER DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT
AND INTERPRETATIONS OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX
LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU
SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF SELLING THE INTERESTS IN YOUR PARTNERSHIP
REPRESENTED BY YOUR UNITS PURSUANT TO OUR OFFER OR OF A DECISION NOT TO SELL IN
LIGHT OF YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES TO LIMITED PARTNERS TENDERING UNITS FOR CASH. You will
recognize gain or loss on a sale of a unit of limited partnership 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 (a)
your share of partnership cash distributions, (b) any decreases in your share of
partnership liabilities, (c) your share of partnership losses, and (d) your
share of nondeductible partnership expenditures that are not chargeable to
capital. For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of your units, your adjusted tax basis in
your units will include your allocable share of partnership income, gain or loss
for the taxable year of disposition. If your adjusted tax basis is less than
your share of partnership liabilities (e.g., as a result of the effect of net
loss allocations and/or distributions exceeding the cost of your unit), your
gain recognized with respect to a unit pursuant to the offer will exceed the
cash proceeds realized upon the sale of such unit.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER. Except as
described below, the gain or loss recognized by you on a sale of a unit pursuant
to the offer generally will be treated as a long-term capital gain or loss if
you held the unit for more than one year. Long-term capital gains recognized by
individuals and certain other noncorporate taxpayers generally will be subject
to a maximum United States federal income tax rate of 20%. If the amount
realized with respect to a unit of limited partnership 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
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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 profits of
a partnership within any 12-month period, such partnership terminates for United
States federal income tax purposes. Your partnership's agreement of limited
partnership prohibits such a sale or exchange of units. If units are validly
tendered and not withdrawn that would cause such a transfer, we will accept for
payment and pay for those units so tendered 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."
During the last 12 months, approximately 6.5% of the total interest in capital
and profits of your partnership have been transferred.
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
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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, which could result in the recognition of
partnership income, gain, or loss in an earlier taxable period than such income,
gain, or loss would otherwise be reported for income tax purposes had your
partnership not terminated.
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 11,323 units, or 30.07%, of the outstanding
limited partnership units of your partnership. If we acquire more than 19.62% of
the outstanding limited partnership units pursuant to this offer, we and our
affiliates will own more than 50% of the total outstanding limited partnership
units. This interest, combined with our control of your partnership's general
partner, would allow us to control the outcome of most voting decisions with
respect to your partnership. Even if we acquire a lesser number of units
pursuant to this offer, we may 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.
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 units are purchased pursuant to the offer, transfers
may be limited in the succeeding 12-month period because the partnership
agreement prohibits the transfer of units that would cause 50% or more of the
total interest in capital and profits of your partnership to be transferred
within a 12-month period, when taken together with all other transfers during
such 12-month period. During the last 12 months, approximately 6.5% of the total
interest in capital and profits of your partnership have been transferred.
Further, 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 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 1,224 unitholders. If
units are validly tendered (and not properly withdrawn) and the purchase of
those units would result in there being fewer than 320 unitholders in your
partnership, we will not purchase any of the units tendered, terminate the
offer, and return all tendered units to the tendering limited partners to assure
that there is no reasonable likelihood that the partnership
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would have fewer than 320 unitholders as a result of the offer. See "The
Offer--Section 17. Conditions of the Offer."
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. Based on
apartment unit data compiled by the National Multi Housing Council, we believe
that AIMCO is one of the largest owners and managers of multi-family apartment
properties in the United States, with a total portfolio of 326,006 apartment
units in 1,841 properties located in 47 states, the District of Columbia and
Puerto Rico. As of June 30, 2002, AIMCO:
- owned and controlled (consolidated) and managed 170,592 units in
663 apartment properties;
- held an equity interest (unconsolidated) and managed 128,911
units in 966 apartment properties; and
- managed for third party owners 26,503 units in 212 apartment
properties, primarily pursuant to long-term, non-cancelable
agreements.
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 partners, 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 be inspected at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York 10005.
For more information regarding AIMCO Properties, 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.
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
-16-
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") and the unaudited
financial statements for the six months ended June 30, 2002 and 2001 set forth
in Part I, Item 1 of AIMCO Properties' Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 filed with the SEC on August 14, 2002 (the "2001
10-Q"). These reports may be inspected at, and copies may be obtained from, the
same places and in the manner set forth above.
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 and the 2001 10-Q. More
comprehensive financial information is included in the 2001 10-K, the 2001 10-Q
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.
-17-
AIMCO PROPERTIES L.P.
(in thousands, except per unit data)
FOR THE YEAR FOR THE SIX MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------- -----------------------------
2001 2000(1) 2002 2001
----------- ----------- ----------- -----------
Operating Data: (unaudited)
Rental and other property revenues $ 1,272,734 $ 1,042,536 $ 688,710 $ 631,288
Property operating and owned management expenses (500,716) (437,148) (273,277) (243,116)
Income from rental property operations 772,018 605,388 415,433 388,172
Income (loss) from investment management business 27,591 15,795 15,759 14,064
General and administrative expenses (18,461) (18,028) (8,017) (8,549)
Depreciation of rental property(2) (336,794) (295,702) (139,907) (185,754)
Interest expense (305,831) (268,004) (168,376) (162,754)
Interest and other income, net 68,594 66,206 45,268 32,038
Operating earnings 148,704 106,008 150,368 57,222
Distribution to minority interest partners
in excess of income (46,359) (24,375) (10,972) (10,814)
Gain (loss) on disposition of real estate property 18,719 28,084 6,106 2,779
Net income 121,064 109,717 145,502 49,187
Net income attributed to preferred stockholders 100,134 70,217 57,797 45,394
Net income attributed to common stockholders 20,930 39,500 87,705 3,793
Other Information:
Total owned or controlled properties (end of period) 552 566 663 575
Total owned or controlled apartment units (end of period) 156,142 153,872 170,592 156,572
Total equity properties (end of period) 574 683 966 607
Total equity apartment units (end of period) 92,626 111,748 128,911 99,594
Units under management (end of period) 31,520 60,669 26,503 56,243
Basic earnings per unit $ 0.25 $ 0.53 $ 0.96 $ 0.05
Dividends paid per unit $ 0.25 $ 0.52 $ 0.94 $ 0.05
Distributions paid per common OP unit $ 3.12 $ 2.80 $ 1.64 $ 1.56
BALANCE SHEET INFORMATION:
Real estate, before accumulated depreciation $ 8,241,058 $ 6,837,954 $ 9,556,052 $ 7,539,503
Real estate, net of accumulated depreciation 6,643,627 5,935,346 7,830,140 6,289,484
Total assets 8,200,526 7,683,425 9,459,858 7,838,815
Total indebtedness 4,631,332 4,217,666 5,197,100 4,582,952
Mandatorily redeemable convertible preferred securities 20,637 32,330 20,637 25,347
Partners' capital 3,080,071 2,831,964 3,680,427 3,018,642
(1) Certain reclassifications have been made to 2001 and 2000 amounts to conform
with the 2002 presentation. These reclassifications represent certain
eliminations of self-charged management fee income and expenses in accordance
with consolidation accounting principles, as well as discontinued operations
resulting from the adoption of Statement of Financial Accounting Standard No.
144. Effective January 1, 2001, AIMCO Properties began consolidating its
previously unconsolidated subsidiaries. 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.
-18-
For the years ended December 31, 2001 and 2000 and the six months ended
June 30, 2002 and 2001 AIMCO Properties' FFO is calculated as follows (amounts
in thousands):
FOR THE YEAR FOR THE SIX MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- ---------------------------
2001 2000 2002 2001
--------- --------- --------- ---------
Net income $ 121,064 $ 109,717 $ 145,502 $ 49,187
Real estate depreciation, net of minority interests 324,649 274,492 123,921 176,079
Real estate depreciation related to unconsolidated entities 57,506 59,360 17,202 28,867
Distribution to minority interest
partners in excess of income 47,701 24,375 10,972 10,814
Amortization of intangibles 18,729 12,068 2,040 9,233
Income tax arising from disposition of real estate property 3,202 -- 768 --
Gain on disposition of real estate property (18,848) (26,335) (8,493) (1,556)
Gain on disposition of land 3,843 -- -- --
Deferred income tax benefit -- 154 -- --
Interest expenses on mandatorily redeemable convertible
Preferred securities 1,568 8,869 517 1,014
Preferred unit distributions (35,747) (26,112) (27,978) (14,861)
--------- --------- --------- ---------
Funds from operations 528,653 439,830 267,366 262,640
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 11,323 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.
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We are making this offer with a view to providing you with liquidity for your
investment, but we may not make any more offers and will not be bound to do so.
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 that could have been pursued by
your general partner.
LIQUIDATION
One alternative would be for the partnership to sell its assets,
distribute the net liquidation proceeds to its partners in accordance with the
agreement of limited partnership, and thereafter dissolve. Partners would be at
liberty to use the net liquidation proceeds after taxes for investment,
business, personal or other purposes, at their option. If your partnership were
to sell its assets and liquidate, you would not need to rely upon capitalization
of income or other valuation methods to estimate the fair market value of
partnership assets. Instead, such assets would be valued through negotiations
with prospective purchasers (in many cases unrelated third parties). The term of
the partnership will continue until December 31, 2032, 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.
-20-
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 $77.00, based on the pro forma operating
results of your partnership for the six months ended June 30,
2002, as capitalized using the direct capitalization method and
using a capitalization rate of 10.18%.
- 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.
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, and we considered the
actual and pro forma operating results of the partnership.
VALUATION OF UNITS. We determined our offer price by: (i) applying a
capitalization rate to your partnership's pro forma operating results for the
six months ended June 30, 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 six months ended June 30, 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 10.18% to pro forma operating results for the six months ended June 30, 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, 99.91% 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.
-21-
Gross valuation of partnership properties $ 7,000,000
Plus: Cash and cash equivalents 250,837
Plus: Other partnership assets, net of security deposits 68,338
Less: Mortgage debt, including accrued interest (4,049,265)
Less: Other liabilities (203,365)
-----------
Partnership valuation before taxes and certain costs 3,066,545
Less: Extraordinary capital expenditures and deferred maintenance (101,500)
Less: Closing costs (87,500)
-----------
Estimated net valuation of your partnership 2,877,545
Percentage of estimated net valuation allocated to holders of units 99.91%
-----------
Estimated net valuation of units 2,874,967
Total number of units 37,273
-----------
Estimated valuation per unit 77
===========
Cash consideration per unit $ 77
===========
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 is of the opinion 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.
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Under your partnership's agreement of limited partnership, the term of
the partnership will continue until December 31, 2032, unless sooner terminated
as provided in the agreement or by law.
COMPARISON TABLE PER UNIT
---------------- --------
Cash offer price ......................... $77.00
Alternatives
Prior cash tender offer price ........ $67.00(1)
Highest price on secondary market .... $99.75(2)
Estimated liquidation proceeds ....... $77.00
(1) Highest price offered in our 2000 through 2001 tender offers.
(2) Since January 1, 2000.
PRIOR TENDER OFFERS. In August 2001, we commenced a tender offer to
purchase units of your partnership at a price of $67.00 per unit, which price
was determined using the same basic methodology as we are using in this current
tender offer. We acquired 809 units, representing approximately 2.15% of the
outstanding units of your partnership, pursuant to that offer.
In November 2000, we commenced a tender offer at the price of $61.10 per
unit, which price was determined using the same basic methodology as we are
using in this current tender offer. We acquired 1,401 units, representing
approximately 3.76% 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 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 June 2, 2002: ...... N/A N/A
Year Ended December 31, 2001: ... 56.00 50.50
Year Ended December 31, 2000: ... 99.75 57.67
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
-23-
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 June 2, 2002: ..... N/A N/A
Year Ended December 31, 2001: .. N/A N/A
Year Ended December 31, 2000: .. N/A N/A
PRIVATE PURCHASES. We purchased four units at a price of $67.00 per
unit, on June 20, 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.
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.
-24-
- 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.
- The prices at which the units have recently sold, to the extent
such information is available.
- The trading market for your units may not be a reliable measure
of value.
- An analysis of possible alternative transactions, including a
property sale, or a liquidation of the partnership.
- The financial condition and results of operations of your
partnership.
- The fact that if your partnership were liquidated -- as opposed
to continuing -- the general partner (which is our subsidiary)
would not receive the substantial fees it currently receives. As
discussed in "Section 9. Background and Reasons for the Offer --
Alternatives Considered by your General Partner," we do not
believe that liquidation of the partnership is in the best
interests of the unitholders. Therefore, we believe that the
fees paid to the general partner would continue even if the
offer was not consummated. We are not proposing to change the
current fee arrangements.
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
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. The conflicts of interest include
the fact that a decision to remove, for any reason, the general partner of your
partnership from its current position as a general partner of your partnership
would result in a decrease or elimination of the substantial management fees
paid to the general partner of your partnership for managing your partnership.
Additionally, 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 $65,000 in 2000 and $184,000 in 2001.
Included in these amounts are fees related to construction management services
of approximately $8,000 and $121,000 for the years 2000 and 2001, respectively.
The construction management service fees are calculated based on a percentage of
-25-
current and certain prior year additions to investment property and are being
depreciated over their estimated useful lives. The property manager is entitled
to receive five percent of gross receipts from the partnership's residential
property for providing property management services. It received management fees
of $77,000 in 2000 and $91,000 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 2000, the partnership paid an
affiliate of the general partner $42,000 for loans costs associated with the
refinancing of the mortgage encumbering the partnership's property. See "The
Offer- Section 13. Certain Information concerning your Partnership -- Schedule
of Mortgages."
Beginning in 2001, the partnership began insuring its property up to
certain limits through coverage provided by AIMCO 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 limits through insurance policies obtained by
AIMCO from insurers unaffiliated with the general partner. During the year ended
December 31, 2001, the partnership paid AIMCO and its affiliates approximately
$24,000 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 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
-26-
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 if we acquire a substantial number of
units in this offer, we and our affiliates will be able to significantly
influence or control the outcome of any such vote. Our primary objective in
seeking to acquire the units pursuant to the offer is not, however, to 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. Drexel Burnham Lambert Real Estate Associates II was formed
under the laws of the State of New York on November 2, 1983. Its primary
business is real estate ownership and related operations. Your partnership was
formed for the purpose of investing in, acquiring, improving, holding,
maintaining, managing, operating, leasing, selling, disposing of and otherwise
dealing with real estate, real estate improvements or interest in real estate
and real estate improvements, and to engage in any and all activities related or
incidental thereto.
Your partnership's investment portfolio currently consists of one
residential apartment complex: Presidential House Apartments, a 203 unit
multifamily community, located in North Miami Beach, Florida.
The general partner of your partnership is DBL Properties Corporation,
which is our wholly owned subsidiary (the "general partner"). A wholly owned
subsidiary of AIMCO also serves as manager of the residential property owned by
your partnership.
There are currently 37,273 units outstanding, which are held of record
by 1,224 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 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. The general partner
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
-27-
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 $204,000 for capital expenditures at the residential property in
2001, and expects to spend approximately $60,900 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.
PREFERRED RETURN. Pursuant to your partnership's agreement of limited
partnership, limited partners are entitled to an 8% cumulative preferred return
on their unrecovered invested capital. As of December 31, 2001, the unpaid
preferred return arrearage totaled approximately $9,741,000.
TERM OF YOUR PARTNERSHIP. Under your partnership's agreement of limited
partnership, the term of the partnership will continue until December 31, 2032,
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 $204,000 for 2001 and which are
budgeted at $60,900 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.
-28-
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. The selected financial information set forth below
for the six months ended June 30, 2002 and 2001 is based on unaudited financial
statements. This information should be read in conjunction with such financial
statements, including notes thereto, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations of Your Partnership" in the
Annual Report on Form 10-KSB of your partnership for the year ended December 31,
2001, and the Quarterly Report on Form 10-QSB for the quarter ended June 30,
2002.
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(IN THOUSANDS, EXCEPT PER UNIT DATA)
For the Year Ended For the Six Months Ended
December 31 June 30
----------------------- ------------------------
2001 2000 2002 2001
------- ------- ------- -------
Operating Data:
Total Revenues $ 1,724 $ 1,614 $ 867 $ 857
Net Income (Loss) 263 2,774 186 82
Net Income per limited partnership unit 6.98 73.67 4.94 2.17
Distributions per limited partnership unit 9.12 123.79 -- 5.02
Balance Sheet Data:
Cash & Cash Equivalents 177 320 248 143
Real Estate, Net of Accumulated Depreciation 2,054 2,050 2,087 1,990
Total Assets 2,425 2,567 2,573 2,422
Notes Payable 4,072 4,164 4,023 4,119
General Partners' Capital (Deficit) 38 35 40 36
Limited Partners' Capital (Deficit) (1,947) (1,867)
(1,763) (1,973)
Partners' Capital (Deficit) (1,909) (1,832)
(1,723) (1,937)
Total Distributions (340) (4,614) -- (187)
Net increase (decrease) in cash and cash
equivalents (143) (371) 71 (177)
Net cash provided by operating activities $ 493 $ 497 $ 230 $ 128
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
- -------- -------- ----------------- ---
Presidential House 10/22/84 Fee ownership Apartments - 203
Apartments subject to first units
mortgage
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
Property Value Depreciation Rate Method Tax Basis
-------- -------- ------------ ---- ------ ---------
(in thousands) (in thousands)
-29-
Presidential House Apartments $8,386 $6,332 5-31.5 yrs SL $2,044
SCHEDULE OF MORTGAGES. The following shows certain information regarding
the outstanding first mortgage encumbering your partnership's property as of
December 31, 2001.
Principal
Balance At
December 31,
2001 Interest Period Maturity
Property (in thousands) Rate Amortized Date
- -------- -------------- -------- --------- ----------
Presidential House Apartments $ 4,072 7.96% 20 yrs 07/01/2020
Scheduled principal payments of the mortgage note payable subsequent to December
31, 2001, are as follows (in thousands):
2002 $ 100
2003 108
2004 117
2005 127
2006 137
Thereafter 3,483
-------
$ 4,072
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.
Average Annual
Rental Rates Average Annual
(per unit) Occupancy
-------------------- -------------------
Property 2001 2000 2001 2000
---- ---- ---- ----
Presidential House Apartments $8,445 $7,861 97% 97%
The real estate industry is highly competitive. The partnership's
property is subject to competition from other properties in the area. The
general partner believes that the property is adequately insured. The
multi-family residential property's lease terms are for one year or less. No
residential tenant leases 10% or more of the available rental space. The
property is in good physical condition, subject to normal depreciation and
deterioration as is typical for assets of this type and age.
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.
-30-
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 $ 69.59(1)
2000 $123.79(2)
2001 $ 9.12(1)
2002 (through June 30, 2002) 0
---------------------------- ----------
Total $202.50
- -------
(1) Consists of cash from operations.
(2) Consists of approximately $17.79 of cash from operations, approximately
$26.32 of cash from refinancing the note encumbering Presidential House
Apartments and approximately $79.68 of proceeds from the sale of its
interest in the Table Mesa Shopping Center joint venture.
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 11,323, or 30.07%, 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 $ 65,000(1) $77,000
2001 $184,000(1) $91,000
- -------------
(1) See "The Offer -- Conflicts of Interest and Transactions with Affiliates
-- Conflicts of Interest that currently exist for your Partnership" with
respect to certain fees related to construction management services
included in such amounts.
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.
ENVIRONMENTAL. Various Federal, state and local laws subject property
owners or operators to liability for the costs of removal or remediation of
certain hazardous substances present on a property. Such laws often impart
liability without regard to whether the owner or operator knew of, or was
responsible for, the release of the hazardous substances. The presence of, or
failure to properly remediate, hazardous substances may adversely affect
occupancy at contaminated apartment communities and the partnership's ability to
sell or borrow against
-31-
contaminated properties. In addition to the costs associated with investigation
and remediation actions brought by governmental agencies, the presence of
hazardous wastes on a property could result in claims by private plaintiffs for
personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal or remediation of hazardous or toxic
substances at the disposal or treatment facility. Anyone who arranges for the
disposal or treatment of hazardous or toxic substances is potentially liable
under such laws. These laws often impose liability whether or not the person
arranging for the disposal ever owned or operated the disposal facility. In
connection with the ownership or operation of properties, the partnership could
potentially be liable for environmental liabilities or costs associated with its
properties or properties it may acquire in the future.
The properties are subject to a Consent Agreement entered In the Matter
of Apartment Investment and Management Company, Docket No. HQ-2002-0003, before
the Environmental Appeals Board, United States Environmental Protection Agency,
and Final Order entered thereon on January 15, 2002, which may require, among
other things, lead-based paint disclosure to residents of properties and/or
certain remedial actions, which may result in costs to the partnership. In
addition to the costs associated with investigating and remediating, the
presence of lead-based paint on a property could result in claims by private
plaintiffs for personal injury, disease, disability or other infirmities. The
general partner believes that the properties are required to be covered by
adequate insurance provided by reputable companies and with commercially
reasonable deductibles and limits and that any costs not covered by insurance
are not expected to be material.
Any remaining costs are not expected to be material. The general partner
believes that the partnership's properties are covered by adequate fire, flood
and property insurance provided by reputable companies and with commercially
reasonable deductibles and limits.
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 environmental matters, capital
expenditures at the property and valuations of the property is 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.
If we acquire a substantial number of additional units pursuant to this offer,
we may be in a position to significantly influence or control such votes of the
limited partners.
15. SOURCE OF FUNDS.
We expect that approximately $1,435,010.50 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 secured $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. Our revolving credit
-32-
facility was amended and restated on March 11, 2002. The obligations under the
amended and restated credit facility are secured by a first priority pledge of
certain non-real estate assets of AIMCO Properties and a second priority pledge
of the equity ownership of AIMCO Properties and certain subsidiaries of AIMCO.
Borrowings under the amended and restated credit facility are available for
general corporate purposes. The amended and restated credit facility matures in
July 2004 and can be extended once at AIMCO's option, for a term of one year.
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, N.A.'s reference rate of 0.5%
over the federal funds rate, plus, in either case, an applicable margin.
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
May 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.
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. In addition, we are
not extending appraisal rights in connection with the offer. You have the
opportunity to make an individual decision on whether or not to tender your
units in the offer.
No provisions have been made with regard to the offer to allow you or
other limited partners to inspect the books and records of your partnership or
to obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, you have the right under your partnership's agreement of
limited partnership to obtain a list of the limited partners.
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 had or may have a material adverse effect on 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
-33-
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 in writing, instituted or
pending any action, proceeding, application or counterclaim by
any Federal, state, local or foreign government, governmental
authority or governmental agency, or by any other person, before
any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i)
challenges or seeks to challenge our purchase of the units,
restrains, prohibits or delays the making or consummation of our
offer, prohibits the performance of any of the contracts or
other arrangements entered into by us (or any affiliates of
ours), or seeks to obtain any material amount of damages as a
result of the transactions contemplated by our offer, (ii) seeks
to make the purchase of, or payment for, some or all of the
units pursuant to our offer illegal or results in a delay in our
ability to accept for payment or pay for some or all of the
units, (iii) seeks to prohibit or limit the ownership or
operation by us or any of our affiliates of the entity serving
as general partner of your partnership or to remove such entity
as general partner of your partnership, or seeks to impose any
material limitation on our ability or the ability of any
affiliate of ours to conduct your partnership's business or own
such assets, (iv) seeks to impose material limitations on our
ability to acquire or hold or to exercise full rights of
ownership of the units including, but not limited to, the right
to vote the units purchased by us on all matters properly
presented to the limited partners, or (v) might result, in our
reasonable judgment, in a material 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
-34-
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 as a result of events and circumstances beyond
our reasonable control adequate cash or financing commitments
available to pay for the units validly tendered; or
- there would be 320 or fewer unit holders outstanding as a result
of the consummation of the offer.
The foregoing conditions are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to such conditions or may be
waived by us at any time prior to the expiration of this offer in our reasonable
discretion. The failure by us at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right.
18. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 18, we are not, based on
information provided by your general partner (which is our subsidiary), aware of
any licenses or regulatory permits that would be material to the business of
your partnership, taken as a whole, and that might be adversely affected by our
acquisition of units as contemplated herein, or any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of units by us pursuant to the offer, other than the filing of a
Tender Offer Statement on Schedule TO with the SEC (which has already been
filed) and any required amendments thereto. While there is no present intent to
delay the purchase of units tendered pursuant to the offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to your partnership or its business, or that certain parts of its
business might not have to be disposed of or other substantial conditions
complied with in order to obtain such approval or action, any of which could
cause us to elect to terminate the offer without purchasing units thereunder.
Our obligation to purchase and pay for units is subject to certain conditions,
including conditions related to the legal matters discussed in this Section 18.
ANTITRUST. We do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of units
contemplated by our offer.
MARGIN REQUIREMENTS. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to our offer.
STATE LAWS. We are not aware of any jurisdiction in which the making of
our offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
If, after such good faith effort, we cannot comply with any such law, the offer
will not be made to (nor will tenders be accepted from or on behalf of) limited
partners residing in such jurisdiction. In those jurisdictions with securities
or blue sky laws that require the offer to be made by a licensed broker or
dealer, the offer shall be made on behalf of us, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
-35-
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.
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.
-36-
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) 460-2889 TOLL FREE (888) 349-2005
Or
(201) 896-1900
-37-
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 director of the general partner of your partnership is
Patrick J. Foye, and its executive officers are Mr. Foye and Martha L. Long.
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
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 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.
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.
Annex I -- Page 2
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE 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.
Martha L. Long............... Ms. Long has been Senior Vice President and Controller of
DBL Properties Corporation since October 1998 as a result
of the acquisition of Insignia Financial Group, Inc. As
of February 2001, Ms. Long was also appointed head of the
service business for AIMCO. From June 1994 until January
1997, she was the Controller for Insignia, and was
promoted to Senior Vice President -- Finance and
Controller in January 1997, retaining that title until
October 1998. From 1988 to June 1994, Ms. Long was
Senior Vice President and Controller for The First
Savings Bank, FSB in Greenville, South Carolina.
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.
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.
Annex I -- Page 3
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
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
Cambridge Associates, Inc. 2000. In 1973, Mr. Bailey co-founded Cambridge
1 Winthrop Square, Associates, Inc., which is an investment consulting firm
Suite 500 for non-profit institutions and wealthy family groups.
Boston, MA 02110 He is also Co-Founder, Treasurer and Director of The
Plymouth Rock Company, Direct Response Corporation and
Homeowners' Direct Corporation, each of which is a United
States personal lines insurance company. He received his
M.B.A. and J.D. degrees in 1973 from Harvard Business
School and Harvard Law School.
Richard S. Ellwood........... Mr. Ellwood was appointed a Director of AIMCO in July
12 Auldwood Lane 1994 and is currently Chairman of the Audit Committee and
Rumson, NJ 07660 a member of the Compensation Committee. Mr. Ellwood is
the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm.
Prior to forming R.S. Ellwood & Co., Incorporated in
1987, Mr. Ellwood had 31 years experience on Wall Street
as an investment banker, serving as: Managing Director
and senior banker at Merrill Lynch Capital Markets from
1984 to 1987; Managing Director at Warburg Paribas Becker
from 1978 to 1984; general partner and then Senior Vice
President and a director at White, Weld & Co. from 1968
to 1978; and in various capacities at J.P. Morgan & Co.
from 1955 to 1968. Mr. Ellwood currently serves as a
director of Felcor Lodging Trust, Incorporated and
Florida East Coast Industries, Inc.
Annex I -- Page 4
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
Mr. Martin was appointed a director of AIMCO in July 1994
J. Landis Martin............. and became Chairman of the Compensation Committee on
199 Broadway March 19, 1998. Mr. Martin is a member of the Audit
Suite 4300 Committee. Mr. Martin has served as President and Chief
Denver, CO 80202 Executive Officer of NL Industries, Inc., a manufacturer
of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation
("Tremont"), a holding company operating though
its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc. ("NL"), since
1990 and as Chief Executive Officer and a
director of Tremont since 1988. Mr. Martin has
served as Chairman of TIMET, an integrated
producer of titanium, since 1987 and Chief
Executive Officer since January 1995. From 1990
until its acquisition by a predecessor of
Halliburton Company ("Halliburton") in 1994, Mr.
Martin served as Chairman of the Board and Chief
Executive Officer of Baroid Corporation, an
oilfield services company. In addition to
Tremont, NL and TIMET, Mr. Martin is a director
of Halliburton, which is engaged in the
petroleum services, hydrocarbon and engineering
industries, and Crown Castle International
Corporation, a communications company.
Thomas L. Rhodes............. Mr. Rhodes was appointed a Director of AIMCO in July 1994
215 Lexington Avenue and is a member of the Audit and Compensation
4th Floor Committees. Mr. Rhodes has served as the President and a
New York, NY 10016 Director of National Review magazine since November 1992,
where he has also served as a Director since
1998. From 1976 to 1992, he held various
positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as
a General Partner from 1987 until November 1992.
He is currently Co-Chairman of the Board,
Co-Chief Executive Officer and a Director of
American Land Lease, Inc. He also serves as a
Director of Delphi Financial Group and its
subsidiaries, Delphi International Ltd., Oracle
Reinsurance Company and the Lynde and Harry
Bradley Foundation.
Annex I -- Page 5
ANNEX II
LETTER OF TRANSMITTAL
TO TENDER UNITS OF LIMITED PARTNERSHIP INTEREST IN
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II (THE "PARTNERSHIP")
PURSUANT TO AN OFFER TO PURCHASE
DATED AUGUST 20, 2002 (THE "OFFER DATE")
BY
AIMCO PROPERTIES, L.P.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT MIDNIGHT, NEW YORK CITY TIME,
ON SEPTEMBER 17, 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) OR (201) 896-1900.
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: By Facsimile:
TOLL FREE: (888) 349-2005 (201) 460-2889
Or
(201) 896-1900
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 THE
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,
Annex II -- Page 2
from time to 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 OCTOBER 18,
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.
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DECEASED OWNER (JOINT TENANT) -- Copy of death certificate.
DECEASED OWNER (OTHERS) -- Copy of death certificate (see also
Executor/Administrator/Guardian below).
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.
-2-
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.
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.
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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER - - Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
- --------------------------------------------------------------------------------------------------------
GIVE THE TAXPAYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF - -
- --------------------------------------------------------------------------------------------------------
1. An individual account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
Funds, the first individual on the account
3. Husband and wife (joint account) The actual owner of the account or, if joint
funds, Either person
4. Custodian account of a minor (Uniform Gift to The minor (2)
Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the only
contributor, the minor (1)
6. Account in the name of guardian or committee The ward, minor or incompetent person (3)
for a 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 The actual owner (1)
or 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.
-2-
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) 460-2889 TOLL FREE (888) 349-2005
Or
(201) 896-1900
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